<PAGE>
As filed with the Securities and Exchange Commission on April 22, 1999
Registration No. 333-75711
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------
Amendment No. 2 to
Form S-6
----------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
----------------
A. Exact name of trust:
EQUITY FOCUS TRUSTS
THEME INVESTING PORTFOLIO SERIES II
B. Name of depositor:
SALOMON SMITH BARNEY INC.
C. Complete address of depositor's principal executive offices:
SALOMON SMITH BARNEY INC.
388 Greenwich Street, 23rd Floor
New York, New York 10013
D. Names and complete address of agent for service:
Copy to:
LAURIE A. HESSLEIN
Salomon Smith Barney Inc. MICHAEL R. ROSELLA, ESQ.
388 Greenwich Street Battle Fowler LLP
New York, New York 10013 75 East 55th Street
New York, New York 10022
(212) 856-6858
E. Title and amount of securities being registered:
An indefinite number of Units of beneficial interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.
F. Proposed maximum offering price to the public of the securities being
registered:
Indefinite
G. Amount of filing fee:
No filing fee required.
H. Approximate date of proposed sale to the public:
As soon as practicable after the effective date of the registration statement.
[X] Check box if it is proposed that this filing will become effective
immediately upon filing on April 22, 1999 pursuant to Rule 487.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EQUITY FOCUS
TRUSTS
------------------------------------------------
Theme Investing Portfolio
Series II
A Unit Investment Trust
<TABLE>
<CAPTION> <C>
<S> Equity Focus Trusts--Theme Investing Portfolio
SALOMONSMITHBARNEY Series II is a unit investment trust consisting
---------------------------- of a fixed portfolio of 30 equity securities.
A member of citigroup [LOGO] These securities were selected by Salomon Smith
Barney Equity Research based on their potential
for strong growth and visibility for continued
growth. The value of the units of the Trust will
fluctuate with the value of the underlying
securities.
The minimum purchase is $250.
</TABLE>
The Securities and Exchange Commission has not approved or
disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal
offense.
Prospectus dated April 22, 1999
Read and retain this Prospectus for future reference
<PAGE>
EQUITY FOCUS TRUSTS--THEME INVESTING PORTFOLIO SERIES II
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
Use this Investment Summary to help you decide whether the portfolio comprising
the Equity Focus Trusts--Theme Investing Portfolio Series II is right for you.
More detailed information can be found later in this prospectus.
Investment Objective
The Trust seeks to provide investors with capital appreciation. The Trust's
diversified portfolio of stocks is for growth-oriented investors. Dividend
income is not a primary objective of this portfolio.
There is no guarantee that the objective of the Trust will be achieved.
Investment Strategy
The Trust uses a "buy and hold" strategy with a portfolio of stocks, designed
to remain fixed over its two-year life. Unlike a mutual fund, the portfolio is
not managed; however, a security can be sold under some adverse circumstances.
Investment Concept and Selection Process
Over the past five years, one of our Equity Research Division's most prominent
and enduring "themes" has been the list of "Consistent Growers." The Trust
targets companies with
. A record of reliable earnings growth and above-average fundamental
strength.
. Attractive price to earnings multiples versus projected growth rates,
relative to other opportunities.
. Ranking in the categories "1" or "2" on Salomon Smith Barney's Investment
Ranking System.
The portfolio has been weighted by the Equity Research Division according to
such factors as a company's fundamental strength and earning visibility. Most
are in the large-cap range, however, some holdings may fall in the mid-cap
range, where our analysts are seeing greater value and higher earnings growth
potential.
Principal Risk Factors
Holders can lose money by investing in this Trust. The value of your units may
increase or decrease depending on the value of the stocks which make up the
Trust. In addition, the amount of dividends you receive depends on each
particular issuer's dividend policy, the financial condition of the companies
and general economic conditions.
The Trust consists primarily of common stocks of domestic issuers. If you
invest in the Trust, you should understand the potential risks associated with
common stocks:
. The financial condition of the issuer may worsen.
. The stock market is subject to volatile increases or decreases in value
as market confidence in and perceptions of issuers change.
. The rate of the dividends previously paid may be reduced or even
eliminated.
A unit investment trust is not actively managed and the Trust will not sell
securities in response to ordinary market fluctuations. Instead securities will
not usually be sold until the Trust terminates, which could mean that the sale
price of the Trust securities
2
<PAGE>
EQUITY FOCUS TRUSTS--THEME INVESTING PORTFOLIO SERIES II
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
may not be the highest price at which these securities traded during the life
of the Trust. Also, this means that securities may remain in the Trust even
though they no longer meet the criteria of the Trust's two investment
strategies.
Public Offering Price
On the first day units are made available to the public, the Public Offering
Price will be approximately $1.00 per unit, with a minimum purchase of $250.
This price is based on the net asset value of the Trust plus the up-front sales
charge. Beginning on the Date of Deposit, the Trustee will calculate the Public
Offering Price of units by using the closing sales prices of the securities in
the portfolio. The Public Offering Price will change daily because prices of
the underlying stocks will fluctuate.
The Public Offering Price per unit will be calculated by:
. Adding the combined market value of the underlying stocks to any cash
held to purchase securities.
. Dividing that sum by the number of units outstanding.
. Adding an initial sales charge.
In addition, during the initial public offering period, a per unit amount
sufficient to reimburse the Sponsor for organization costs is added to the
public offering price. After the initial public offering period, the repurchase
and cash redemption price of units will be reduced to reflect the estimated
cost of liquidating securities to meet the redemption, currently estimated at
$.97 per 1,000 units.
Market for Units
The Sponsor intends to repurchase units at a price based on their net asset
value. If the Sponsor decides to discontinue the policy of repurchasing units,
you can redeem units through the Trustee, at a price determined by using the
same formula.
Rollover Option and Termination
When the Trust is about to terminate, you may have the option to rollover your
proceeds into a future Theme Investing Portfolio, if one is available. The
initial sales charge will be waived if you decide to exchange; however, you
will be subject to the subsequent Series' deferred sales charge. If you decide
not to exchange your proceeds into the next series, you will receive a cash
distribution after the trust terminates. You will pay your share of expenses
associated with a rollover or termination, including brokerage commissions on
the sale of securities.
Taxation
Your acquisition of units of the Trust will be the acquisition of an asset. In
general, dividends of the Trust will be taxed as ordinary income, whether
received in cash or reinvested in additional units. If you are a foreign
investor, you should be aware that distributions from the Trust will generally
be subject to information reporting and withholding taxes.
An exchange of units in the Trust for units in another series will be treated
as a sale of units, and any gain realized on the exchange may be subject to
federal income tax.
If you are taxed as an individual and have held your units for more than 12
months, you may be entitled to a 20% maximum federal income tax rate on gains
from the sale of your units.
3
<PAGE>
EQUITY FOCUS TRUSTS--THEME INVESTING PORTFOLIO SERIES II
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 Amounts per
Public Offering Price 1,000 Units
--------------------- -----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase (as a percentage of offering
price)..................................... 1.00%* $10.00
Deferred Sales Charge***.................... 1.75%** 17.50
---- ------
Total...................................... 2.75% $27.50
==== ======
Maximum Sales Charge Imposed on Reinvested
Dividends ................................. 1.75%**** $17.50
==== ======
Reimbursement to Sponsor for Estimated Or-
ganization Costs........................... .296% $ 2.96
==== ======
Estimated Annual Trust Operating Expenses
(expenses deducted from Trust 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.................... .049% $ .49
---- ------
Total...................................... .161% $ 1.60
==== ======
<CAPTION>
Cumulative Expenses and
Charges Paid for Period:
Example ---------------------------------
1 year 2 years
------ -------
<S> <C> <C>
An investor would pay the following expenses
and charges on a $10,000 investment,
assuming the Trust's estimated annual
operating expense ratio of .161% and a 5%
annual return on the investment throughout
the period.................................. $322 $513
</TABLE>
The example also assumes reinvestment of all dividends and distributions. 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
higher or lower.
- ------------
* The Initial Sales Charge would exceed 1.00% if the Public Offering Price
exceeds $1,000 per 1,000 Units.
** The actual fee is $2.50 per month per 1,000 Units paid on seven monthly
Deferred Sales Charge Payment Dates. 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 total second year deferred sales charge of $17.50 per 1,000
units, consisting of $2.50 per 1,000 units paid on seven monthly Deferred
Sales Charge Payment Dates. 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 or less
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.
4
<PAGE>
EQUITY FOCUS TRUSTS--THEME INVESTING PORTFOLIO SERIES II
SUMMARY OF ESSENTIAL INFORMATION
AS OF APRIL 21, 1999+
Sponsor
Salomon Smith Barney Inc.
Trustee and Distribution Agent
The Chase Manhattan Bank
Deferred Sales Charge Payment Dates
The first day of each month commencing October 1, 1999 through April 1, 2000
and June 1, 2000 through December 1, 2000.
Sales Charge
The sales charge consists of an initial sales charge and an annual deferred
sales charge. On the Initial Date of Deposit the initial sales charge is 1.00%
of the Public Offering Price. The initial sales charge is paid directly from
the amount invested. The annual deferred sales charge of approximately 1.75% is
paid during each of the two years of the Trust through a reduction of the net
asset value of the Trust 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 May 22, 2000. Upon a repurchase, redemption or exchange of Units
before April 1, 2000, any remaining first year deferred sales charge will be
deducted from the proceeds. Similarly, upon a repurchase, redemption or
exchange of units after May 22, 2000 but before December 1, 2000, any remaining
second year deferred sales charge payments will be deducted from the proceeds.
Mandatory Termination Date
April 30, 2001, or at any earlier time by the Sponsor with the consent of
Holders of 51% of the Units then outstanding.
Special Redemption Date
May 22, 2000.
Distributions
Distributions of income, if any, will be made on the next to last business day
of each year commencing December 30, 1999, to Holders of record on the
immediately prior business day of each year, commencing December 29, 1999.
Distributions will be automatically reinvested in additional units of the Trust
unless a Holder elects to receive its distribution in cash. A final
distribution will be made upon termination of the Trust.
Record Day
The business day immediately prior to a Distribution Day.
Distribution Day
On the next to last business day of each year and upon termination and
liquidation of the Trust.
Evaluation Time
4:00 P.M. New York time (or earlier close of the New York Stock Exchange).
Minimum Value of Trust
The Trust Indenture may be terminated if the net value of the Trust is less
than 40% of the aggregate net asset value of the Trust at the completion of the
initial public offering period.
Trustee's Annual Fee
$.86 Per 1,000 Units
Sponsor's Annual Fee
Maximum of $.25 per 1,000 Units.
- ------------
+The Initial Date of Deposit. The Date of Deposit is the date on which the
Trust Indenture between the Sponsor and the Trustee was signed and the deposit
with the Trustee was made.
5
<PAGE>
EQUITY FOCUS TRUSTS--THEME INVESTING PORTFOLIO SERIES II
SUMMARY OF ESSENTIAL INFORMATION
AS OF APRIL 21, 1999
<TABLE>
<CAPTION>
<S> <C>
Portfolio
Number of issues of common stock............................... 30
Number of different industry sectors........................... 8
Portfolio contains the following industry sectors:
Capital Goods, 2 (6.86%); Communications, 3 (11.20%);
Consumer Cyclicals, 5 (16.92%); Consumer Staples, 5
(15.37%); Financials, 6 (18.78%); Healthcare, 3 (10.95%);
Raw & Intermediate Materials, 1 (3.54%); and Technology, 5
(16.38%).
Percentage of High Risk Securities
(as described in footnote 2 to Portfolio) .................. 10.33%
Initial Number of Units.......................................... 1,000,000
Fractional Undivided Interest in Trust
Represented by Each Unit........................................ 1/1,000,000
Public Offering Price per 1,000 Units
Aggregate Value of Securities in Trust......................... $ 987,187
===========
Divided by Number of Units of Trust (times 1,000).............. $ 987.19
Plus Initial Sales Charge of 1.00% of Public Offering Price
(1.010% of the net amount invested in Securities)............. $ 9.97
-----------
Public Offering Price.......................................... $ 997.16
Plus Estimated Organization Costs.............................. $ 2.96
Plus the amount in the Income and Capital Accounts............. 0
-----------
Total.......................................................... $ 1,000.12
===========
Sponsor's Repurchase Price and Redemption
Price per 1,000 Units (based on value of underlying Securities). $ 972.65
Sponsor's Profit on Deposit...................................... $ 6,528
</TABLE>
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee and Unitholders of Equity Focus Trusts--Theme Investing
Portfolio Series II:
We have audited the accompanying statement of financial condition, including
the portfolio, of Equity Focus Trusts--Theme Investing Portfolio Series II, as
of April 21, 1999. This financial statement is the responsibility of the
Trustee (see note 1 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
April 21, 1999, 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--Theme Investing Portfolio Series II, as of April 21, 1999, in
conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
April 21, 1999
7
<PAGE>
EQUITY FOCUS TRUSTS -- THEME INVESTING PORTFOLIO SERIES II
Statement of Financial Condition as of Initial Date of Deposit, April 21, 1999
<TABLE>
<CAPTION>
TRUST PROPERTY(1)
<S> <C>
Investment in Securities:
Contracts to purchase Securities(2)............................... $ 990,147
----------
Total............................................................. 990,147
==========
LIABILITIES
Reimbursement to Sponsor for Organization Cost(3).................. 2,960
Deferred Sales Charge(4)........................................... 17,500
----------
Total............................................................. 20,460
==========
INTEREST OF UNITHOLDERS
1,000,000 Units of fractional undivided interest outstanding:
Cost to investors(5)............................................... $1,000,118
Less: Gross underwriting commissions(6)............................ 27,471
Less: Reimbursement to Sponsor for Organization Costs(3) .......... 2,960
----------
Net amount applicable to investors................................. 969,687
----------
Total.............................................................. $ 990,147
==========
</TABLE>
- ------------
(1) 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 statement other than the estimate of
organizational costs, for which the Sponsor is responsible.
(2) Aggregate cost to the 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. See also the column headed
Market Value of Securities. An irrevocable letter of credit in the amount
of $2,000,000 has been deposited with the Trustee for the purchase of
Securities. The letter of credit was issued by Svenska Handelsbanken.
(3) 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 $2.96 per 1,000 Units for the
Trust. 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 greater than the estimated amount, only
the estimated organization costs added to the Public Offering Price will be
reimbursed to the Sponsor and deducted from the assets of the Trust.
(4) 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. 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 April 1, 2000 the remaining portion of the
first year deferred sales charge applicable to such Units will be
transferred to such account on the redemption date.
(5) Aggregate public offering price computed on the basis set forth under
Public Sale of Units--Public Offering Price.
(6) Assumes a maximum first year sales charge of 2.75% of the Public Offering
Price (2.828% of the net amount invested), although due to fluctuations in
the value of the Securities, the total maximum sales charge may be more
than 2.75% of the Public Offering Price.
8
<PAGE>
PORTFOLIO OF EQUITY FOCUS TRUSTS--THEME INVESTING PORTFOLIO II, ON THE
INITIAL DATE OF DEPOSIT, APRIL 21, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Stock Investment Number Percentage of
Securities(1) Symbol Ranking(2) of Shares of Portfolio Securities(4)
------------- ------ ---------- --------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Abercrombie & Fitch Co.
"A' ANF 1-H 400 3.72% $ 36,825
AES Corp. # AES 1-M 700 3.45 34,125
Albertson's, Inc. ABS 1-M 600 3.14 31,088
ALLTEL Corp. AT 1-M 500 3.59 35,500
American Int'l Group # AIG 2-L 250 3.24 32,109
Apollo Group "A' * APOL 1-M 1,300 3.23 32,013
Automatic Data
Processing AUD 2-L 800 3.34 33,050
Century Tel. Enterprises
# CTL 1-M 800 3.59 35,550
Charter One Financial * COFI 1-M 1,000 3.06 30,250
Dollar Tree Stores #* DLTR 1-M 900 3.24 32,063
Electronic Data Systems
# EDS 1-M 600 3.15 31,163
Federal Nat'l Mtge # FNM 1-M 450 3.29 32,597
Gannett Co. GCI 1-L 500 3.59 35,500
Gillette Co. # G 2-M 600 3.10 30,713
Hartford Life "A' # HLI 1-M 600 3.27 32,400
Home Depot HD 1-L 500 3.14 31,063
Interpublic Group Cos. IPG 1-M 400 2.92 28,925
Kimberly-Clark # KMB 2-M 600 3.54 35,100
Marsh & McLennan # MMC 1-L 400 3.13 31,000
Medtronic, Inc. # MDT 1-M 500 3.72 36,844
Microsoft Corp.* MSFT 1-M 400 3.31 32,800
Paychex Inc.* PAYX 1-H 600 3.11 30,750
PepsiCo Inc. # PEP 2-M 800 3.15 31,150
Pitney Bowes # PBI 1-L 500 3.47 34,375
Protective Life Corp. # PL 1-L 700 2.79 27,650
Raytheon Co. "A' # RTN.A 1-M 500 3.41 33,750
SBC Communications # SBC 1-M 700 4.02 39,856
Schering-Plough SGP 1-M 700 3.73 36,925
STERIS Corp. STE 1-H 1,300 3.50 34,694
Young & Rubicam # YNR 1-M 700 3.06 30,319
------ --------
100.00% $990,147
====== ========
</TABLE>
The Notes following the Portfolio are an integral part of the Portfolio of
Securities.
9
<PAGE>
Notes to Portfolio of Securities
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on April 21, 1999. 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) -15% to -15% -15% 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 LLP.
(3) Per 1,000,000 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on April 21, 1999. Subsequent to the
Initial Date of Deposit, Securities are valued, for Securities quoted on a
national securities exchange, at the closing sale prices, or if no price
exists, at the mean between the closing bid and offer prices, or for
Securities not so quoted, at the mean between bid and offer prices on the
over-the-counter market. See Redemption--Computation of Redemption Price
Per Unit.
----------------
The following information is unaudited:
* 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, has acted as manager (co-
manager) of a public offering of the securities of this company or an
affiliate.
10
<PAGE>
DESCRIPTION OF THE TRUST
Objective of the Trust
The objective of Equity Focus Trusts, Theme Investing Portfolio Series II
(the "Trust") is to provide investors with the possibility of capital
appreciation for the Trust portfolio (the "Portfolio") through a convenient and
cost-effective investment in a fixed portfolio consisting of shares of common
stock and similar securities (the "Securities") selected by the Sponsor for the
Portfolio. The Sponsor has selected for the Portfolio, securities that it
considers to have the potential for capital appreciation over a period of two
years relative to the risks and opportunities. The payment of dividends is not
a primary objective of the Trust.
Achievement of the Trust's objective is dependent upon several factors
including the financial condition of the issuers of the Securities and any
appreciation of the Securities. Furthermore, because of various factors,
including without limitation, Trust sales charges and expenses, unequal
weightings of stocks, brokerage costs and any delays in purchasing securities
with cash deposited, investors in the Trust may not realize as high a total
return as the theoretical performance of the underlying stocks in the
Portfolio.
Structure and Offering
This Series of Equity Focus Trusts is a "unit investment trust." The Trust
was created under New York law by a Trust Indenture (the "Indenture") between
the Sponsor and the Trustee. 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. On the date of this Prospectus, each unit of the Trust (a
"Unit") represented a fractional undivided interest in the Securities listed
under Portfolio set forth under the Summary of Essential Information.
Additional Units of the Trust will be issued in the amount required to satisfy
purchase orders by depositing in the Trust cash (or a bank letter of credit in
lieu of cash) with instructions to purchase Securities, contracts to purchase
Securities together with irrevocable letters of credit, or additional
Securities. On each settlement date (estimated to be three business days after
the applicable date on which Securities were deposited in the Trust), the Units
will be released for delivery to investors and the deposited Securities will be
delivered to the Trustee. As additional Units are issued by the Trust as a
result of the deposit of cash (or a letter of credit in lieu of cash) with
instructions to purchase additional Securities, the aggregate value of the
Securities in the Trust will be increased and the fractional undivided interest
in the Trust represented by each Unit will be decreased. There is no limit on
the time period during which the Sponsor may continue to make additional
deposits of Securities into the Trust.
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
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number of Units outstanding. Deposits of Additional Securities subsequent to
the 90-day period following the Initial Date of Deposit must replicate exactly
the proportionate relationship among the number of shares of each of the
Securities comprising the Portfolio of the Trust at the end of the initial 90-
day period.
The Public Offering Price of Units prior to the Evaluation Time specified in
the Summary of Essential Information 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 the Trust will thus vary in the
future from the amount set forth in the Summary of Essential Information. See
Public Sale of Units-Public Offering Price for a complete description of the
pricing of Units.
The Sponsor will execute orders to purchase in the order it determines, in
good faith, that they are received. However, 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. Further, 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.
Units will be sold to investors at the Public Offering Price next computed
after receipt of the investor's order to purchase Units. The Sponsor reserves
the right to accept or reject any purchase order in whole or in part.
The 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 Theme Investing Portfolio are each based on a specific
research investing theme or industry trend identified by analysts of Salomon
Smith Barney, based on an analysis of each company and the industry group as a
whole. One of the most prominent and enduring themes identified by Salomon
Smith Barney's analysts has been a group of stocks called "Consistent Growers."
These Consistent Growers can be found in a cross-section of industries, among
large or mid-size companies, both domestically and globally. To qualify as a
Consistent Grower, a company has demonstrated a record of reliable earnings
growth over time and has shown above-average fundamental strength. All of these
Securities are rated "1" or "2" on Salomon Smith Barney's Investment Ranking
System. Moreover, the company's stock must be selling at a price considered by
Salomon Smith Barney's analysts to be reasonable, given current market
conditions.
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
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pay sales charges or commissions, which will reduce his or her total return.
Total returns and/or average annualized returns for various periods of a
previous Theme Investing Portfolio may be included from time to time in
advertisements and sales literature. Trust performance may be compared to
performance of the S&P 500 Composite Stock Index. As with other 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 industry group, and the basis on which the stock was
selected.
All of the domestic Securities are publicly traded either on a stock exchange
or in the over-the-counter market. Most of the contracts to purchase Securities
deposited initially in the Trust are expected to settle in three business days,
in the ordinary manner for such Securities. Any foreign Securities are publicly
traded on a variety of foreign stock exchanges. Settlement of contracts for
foreign Securities varies by country and may take place prior to the settlement
of purchase of Units on the Initial Date of Deposit.
The Trust consists of such Securities as may continue to be held from time to
time in the Trust and any additional and replacement Securities and any money
market instruments acquired and held by the Trust pursuant to the provisions of
the Indenture (including the provisions with respect to the deposit into the
Trust of Securities in connection with the sale of additional Units to the
public) together with undistributed income therefrom and undistributed and
uninvested cash realized from the disposition of Securities (see Administration
of the Trust--Accounts and Distributions; Trust Supervision). The Indenture
authorizes, but does not require, the Trustee to invest the net proceeds of the
sale of any Securities in eligible money market instruments to the extent that
the proceeds are not required for the redemption of Units. Any money market
instruments acquired by the Trust must be held until maturity and must mature
no later than the next Distribution Day and the proceeds distributed 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 Market Value of Securities listed under the Portfolio of
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 Mandatory
Termination of Trust, and may be liquidated sooner if the net asset value of
the Trust falls below that specified under Minimum Value of Trust set forth in
the Summary of Essential Information (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 is set forth under the Summary of
Essential
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Information. Income Distributions, if any, will be automatically reinvested in
additional Units of the Trust, subject only to the remaining applicable
Deferred Sales Charge deduction, 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.
RISK FACTORS
Common Stock
An investment in Units should be made with an understanding of the risks that
an investment in common stocks entails. These include 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 10.33% 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."
Shareholders of common stocks have rights to receive payments from the
issuers of those common stocks that are generally subordinate to those of
creditors or holders of debt obligations or preferred stocks of such issuers.
Shareholders of common stocks of the type held by the Trust have a right to
receive dividends only when and if, and in the amounts, declared by the
issuer's board of directors and have a right to participate in amounts
available for distribution by the issuer only after all other claims on the
issuer have been paid or provided for. By contrast, holders of preference
stocks have the right to receive dividends at a fixed rate when and as declared
by the issuer's board of directors, normally on a cumulative basis, but
generally do not participate in other amounts available for distribution by the
issuing corporation. Cumulative preferred stock dividends must be paid before
common stock dividends and any cumulative preferred stock dividend omitted is
added to future
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dividends payable to the holders of cumulative preferred stock. Preferred
stocks are also entitled to rights on liquidation which are senior to those of
common stocks. Moreover, common stocks do not represent an obligation of the
issuer and, therefore, do not offer any assurance of income or provide the same
degree of protection of capital as do debt securities. The issuance of
additional debt securities or preferred stock will create prior claims for
payment of principal, interest and dividends which could adversely affect the
ability and inclination of the issuer to declare or pay dividends on its common
stock or the rights of holders of common stock with respect to assets of the
issuer upon liquidation or bankruptcy. The value of common stocks are subject
to market fluctuations for as long as the common stocks remain outstanding. As
a result, 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.
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.
Dividends
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 Taxes.
Fixed Portfolio
Investors should be aware that the Trust is not "managed" and as a result,
the adverse financial condition of a company will not result in the elimination
of its securities from the Portfolio of the Trust except under extraordinary
circumstances. Investors should note in particular that the Securities were
selected on the basis of the criteria set forth under Objective of the Trust
and that the Trust may continue to purchase or hold Securities originally
selected through this process even though the evaluation of the attractiveness
of the Securities may have changed. A number of the Securities in the Trust may
also be owned by other clients of the Sponsor. However, because these clients
may have differing investment objectives, the Sponsor may sell certain
Securities from those accounts in instances where a sale by the Trust would be
impermissible, such as to maximize return by taking advantage of market
fluctuations. See Administration of the Trust -- Trust Supervision. In the
event a public tender offer is made for a Security or a merger or acquisition
is announced affecting a Security, the Sponsor may instruct the Trustee to
tender or sell the Security on the open market when, in its opinion, it is in
the best interest of the holders of the Units to do so.
Although the Portfolio is regularly reviewed and evaluated and the Sponsor
may instruct the Trustee to sell Securities under certain limited
circumstances, Securities will not be sold by the Trust to take advantage of
market fluctuations or changes in anticipated rates of appreciation. As a
result, the amount realized upon the sale of the Securities may not be the
highest price attained by
an individual Security during the life of the Trust. The prices of single
shares of each of the Securities in the Trust vary widely, and the effect of a
dollar of fluctuation, either higher or lower, in stock prices will be much
greater as a percentage of the lower-price stocks' purchase price than as a
percentage of the higher-price stocks' purchase price.
Additional Securities
Investors should note that in connection with the issuance of additional
Units during the Public Offering Period the Sponsor may deposit cash (or a
letter of credit in lieu of cash) with instructions to
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purchase Securities, additional Securities or contracts to purchase Securities,
in each instance maintaining the original percentage relationship, subject to
adjustment under certain circumstances, among the number of shares of each
Security in the Trust. To the extent the price of a Security increases or
decreases between the time cash is deposited with instructions to purchase the
Security at the time the cash is used to purchase the Security, Units may
represent less or more of that Security and more or less of the other
Securities in the Trust. In addition, brokerage fees (if any) incurred in
purchasing Securities with cash deposited with instructions to purchase the
Securities will be an expense of the Trust. Price fluctuations between the time
of deposit and the time the Securities are purchased, and payment of brokerage
fees, will affect the value of every Holder's Units and the Income per Unit
received by the Trust.
Organization Costs
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 after the completion of the initial public
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 public offering period, there may be a decrease in the value
of the 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 the
amount set forth under "Plus Estimated Organization Costs" in the Summary of
Essential Information, 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.
Termination
The Trust may be terminated at any time and all outstanding Units liquidated
if the net asset value of the Trust falls below 40% of the aggregate net asset
value of the Trust at the completion of the initial public offering period.
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 in the
Summary of Essential Information.
Foreign Securities
The Trust may hold Securities of non-U.S. issuers directly or through
American Depository Receipts ("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 or revaluation of currencies,
. future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign 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
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volatile than those of securities of comparable domestic companies. In
addition, with respect to certain foreign countries, there is the possibility
of expropriation, nationalization, confiscatory taxation and limitations on the
use or removal of funds or other assets of the Trust, including the withholding
of dividends. Foreign securities may be subject to foreign government taxes
that could reduce the yield on such securities. Since the Trust may invest in
securities quoted in currencies other than the United States dollar, changes in
foreign currency exchange rates may adversely affect the value of foreign
securities in the Portfolio and the net asset value of Units of the Trust.
Investment in foreign securities may also result in higher expenses due to the
cost of converting foreign currency to United States dollars, the payment of
fixed brokerage commissions on certain foreign exchanges, which generally are
higher than commissions on domestic exchanges, and expenses relating to foreign
custody.
In addition, for the foreign issuers that are not subject to the reporting
requirements of the Securities Exchange Act of 1934, there may be less publicly
available information than is available from a domestic issuer. Also, foreign
issuers are not necessarily subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic issuers. However, the Sponsor anticipates that adequate
information will be available to allow the Sponsor to supervise the Portfolio
as set forth in Administration of the Trust -- Portfolio Supervision.
On the basis of the best information available to the Sponsor at the present
time, none of the Securities is subject to exchange control restrictions under
existing law which would materially interfere with payment to the Trust of
dividends due on, or proceeds from sale of, the Securities either because the
particular jurisdictions have not adopted any currency regulations of this type
or because the issues qualify for an exemption, or the Trust, as an
extraterritorial investor, has qualified its purchase of the Securities as
exempt by following applicable "validation" or similar regulatory or exemptive
procedures. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely affect
payments to the Trust.
In addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of international
securities in the Portfolio and on the ability of the Trust to satisfy its
obligation to redeem Units tendered to the Trustee for redemption (see
Redemption).
Exchange Rate Fluctuation
In recent years, foreign exchange rates have fluctuated sharply. Income from
foreign equity securities held by the Trust, including those underlying any
ADRs held by the Trust, would be payable in the currency of the country of
their issuance. However, the Trust will compute its income in United States
dollars, and the computation of income will be made on the date of its receipt
by the Trust at the foreign exchange rate in effect on that date. Therefore, if
the value of the foreign currency falls relative to the United States dollar
between receipt of the income and its conversion to United States dollars, the
risk of such decline will be borne by Holders. In addition, the cost of
converting such foreign currency to United States dollars would also reduce the
return to the Holder.
American Depositary Shares and Receipts
American Depositary Shares ("ADSs"), and receipts therefor (ADRs), are issued
by an American bank or trust company to evidence ownership of underlying
securities issued by a foreign corporation. These instruments may not
necessarily be denominated in the same currency as the securities into which
they may be converted. Generally, ADSs and ADRs are designed for use in the
United States securities markets. For purposes of this Prospectus the term ADR
generally includes ADSs.
Legal Proceedings and Legislation
At any time after the Initial Date of Deposit, additional legal proceedings
may be initiated on
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various grounds, or legislation may be enacted, with respect to any of the
Securities in the Trust or to matters involving the business of the issuer of
the Securities. There can be no assurance that future legal proceedings or
legislation will not have a material adverse impact on the Trust or will not
impair the ability of the issuers of the Securities to achieve their business
and investment goals.
Year 2000 Issue
The Trust, like other businesses and entities, could 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. The Sponsor expects
that their systems will be compliant before the year 2000. However, there can
be no assurance that the Year 2000 Problem will be properly or timely resolved
so to avoid any adverse impact 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 effect, if any, the Year 2000 Problem will have on such issuers.
PUBLIC SALE OF UNITS
Public Offering Price
The Public Offering Price of the Units for the Trust is computed by adding
the applicable initial sales charge 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 total
sales charge consists of an initial sales charge and a deferred sales charge
equal, in the aggregate, to a maximum charge of 2.75% of the Public Offering
Price (2.83% 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 maximum sales charge of 2.75%. The initial sales
charge on the Initial Date of Deposit is 1.00% of the Public Offering Price.
Subsequent to the Initial Date of Deposit, the amount of the initial sales
charge will vary with changes in the aggregate value of the Securities in the
Trust. The initial sales charge is deducted from the purchase price of a Unit
at the time of purchase and paid to the Sponsor. The first year deferred sales
charge is a monthly charge of $2.50 per 1,000 Units and is accrued in seven
monthly installments commencing on October 1, 1999 and will be charged to the
Capital Account on the first day of each month thereafter through April 1,
2000. If a Deferred Sales Charge Payment Date is not a business day, the
payment will be charged to the Trust on the next business day. In addition,
Holders who elect to hold Units after May 22, 2000 (the "Special Redemption
Date") will be subject to an additional deferred sales charge of $17.50 per
1,000 Units. This second year deferred sales charge will accrue in seven
monthly installment of $2.50 commencing on June 1, 2000 through December 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 past the Special
Redemption 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 4.50% of the Public Offering
Price). To the extent that the entire first year deferred sales charge of
$17.50 per 1,000 Units has not been deducted at the time of repurchase or
redemption of Units prior to April 1, 2000, any unpaid amount will be deducted
from the proceeds or in calculating an in kind distribution. Similarly, to the
extent the entire 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
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Special Redemption Date but prior to December 1, 2000 any unpaid amount will be
deducted from the proceeds or in calculating an in kind distribution. Units
purchased pursuant to the Reinvestment Plan are subject only to the remaining
applicable deferred sales charge deduction (see Reinvestment Plan).
Purchasers on April 22, 1999 (the first day Units will be available to the
public) will be able to purchase Units at approximately $1.00 each (including
the initial sales charge). To allow Units to be priced at approximately $1.00,
the Units outstanding as of the Evaluation Time on April 22, 1999 (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 initial sales charge applicable to quantity purchases is reduced on a
graduated scale for sales to any purchaser of at least 50,000 Units. Sales
charges are as follows:
<TABLE>
<CAPTION>
Initial Sales Charge
---------------------
Percent of Percent of Maximum Dollar
Offering Net Amount Amount Deferred
Number of Units* Price Invested Per 1,000 Units
- ---------------- ---------- ---------- ---------------
<S> <C> <C> <C>
Fewer than 50,000......................... 1.00% 1.010% $17.50
50,000 but less than 100,000.............. .75 .758 17.50
100,000 but less than 250,000............. .25 .253 17.50
250,000 but less than 1,000,000........... 0 0 17.50
</TABLE>
- ------------
* The reduced sales charge is also applied on a dollar basis utilizing a
breakpoint equivalent in the above table of $1,000 for 1,000 Units, etc.
For purchases of at least 1,000,000 Units or $1,000,000 or more, the total
sales charge will be 1.00% (or 1.010% of the net amount invested).
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 series of a unit investment
trust sponsored by Salomon Smith Barney. Units held in the name of the spouse
of the purchaser or in the name of a child of the purchaser under 21 years of
age are deemed to be registered in the name of the purchaser for purposes of
calculating the applicable sales charge. The graduated sales charges are also
applicable to a trustee or other fiduciary purchasing securities for a single
trust estate or single fiduciary account.
Valuation of Securities by the Trustee is made as of the close of business on
the New York Stock Exchange on each business day. Securities quoted on national
stock exchange or Nasdaq National Market are valued at the closing sale price,
or, if no closing sales price exists, at the mean between the closing bid and
offer prices. Securities not so quoted are valued at the mean between bid and
offer prices.
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 units for Units of the Trust will
generally be a taxable event.
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.
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Public Distribution
Units will be distributed to the public at the Public Offering Price through
the Sponsor, as sole underwriter of the Trust, and may also be distributed
through dealers.
The Sponsor intends to qualify Units 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 initial sales charge of 1.00% of the Public Offering Price
(subject to reduction on a graduated scale basis in the case of volume
purchases, and subject to reduction for purchasers as described under Public
Offering Price above) and the monthly Deferred Sales Charge of $2.50 per 1,000
Units.
On the Initial Date of Deposit, the Sponsor also realized a profit or loss on
deposit of the Securities into each of the Trusts in the amount set forth under
Investment Summary, which equals the difference between the cost of the
Securities to 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 Portfolio on the Initial Date
of Deposit were acquired, except as indicated under Portfolio.
In maintaining a market for the Units (see Market for Units), the Sponsor
will also realize profits or sustain losses in the amount of any difference
between the prices at which it buys Units (based on the aggregate value of the
Securities) and the prices at which it resells such Units (which include the
sales charge) or the prices at which the Securities are sold after it redeems
such Units, as the case may be.
MARKET FOR UNITS
While the Sponsor is not obligated to do so, its intention is to maintain a
market for Units and offer continuously to purchase Units from the Initial Date
of Deposit at prices, subject to change at any time, which will be computed by
adding:
. the aggregate value of Securities in the Trust,
. amounts in the Trust, including dividends receivable on stocks trading
ex-dividend, and
. all other assets in the Trust.
deducting therefrom the sum of:
. taxes or other governmental charges against the Trust not previously
deducted,
. accrued fees and expenses of the Trustee (including legal and auditing
expenses), the Sponsor and counsel to the Trust and certain other
expenses, and
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. amounts for distribution to Holders of record as of a date prior to the
evaluation.
The result of the above computation is divided by the number of Units
outstanding as of a date prior to the evaluation, and the result of such
computation is divided by the number of Units outstanding as of the date of
computation. The Sponsor may discontinue purchases of Units if the supply of
Units exceeds demand or for any other business reason. The Sponsor, of course,
does not in any way guarantee the enforceability, marketability or price of any
Securities in the Portfolio or of the Units. On any given day, however, the
price offered by the Sponsor for the purchase of Units shall be an amount not
less than the Redemption Price per Unit, based on the aggregate value of
Securities in the Trust on the date on which the Units 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.
After the initial public offering period, the Redemption Price per Unit will be
reduced to reflect the estimated cost of liquidating securities to meet
redemptions. 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 redeeming Holder if
the Holder tenders at least 250,000 Units. Thus, a Holder will be able (except
during a period described in the last paragraph under this heading), not later
than the seventh calendar day following such tender (or if the seventh calendar
day is not a business day, on the first business day prior thereto), to receive
in kind an amount per Unit equal to the Redemption Price per Unit (computed as
described in Redemption--Computation of Redemption Price per Unit) as
determined as of the day of tender. The Redemption Price per Unit for in kind
distributions (the "In Kind Distribution") will take the form of the
distribution of whole and fractional shares of each of the Securities in the
amounts and the appropriate proportions represented by the fractional undivided
interest in the Trust of the Units tendered for redemption (based upon the
Redemption Price per Unit).
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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,
President's Day, Good Friday, Memorial Day (observed), Independence Day, Labor
Day, Thanksgiving or Christmas. The right of redemption may be suspended and
payment postponed for any period, determined by the Securities and Exchange
Commission ("SEC"), (1) during which the New York Stock Exchange, Inc. is
closed other than for customary weekend and holiday closings, (2) during which
the trading on that Exchange is restricted or an emergency exists as a result
of which disposal or evaluation of the Securities is not reasonably practicable
or (3) for such periods as the SEC may by order permit.
Computation of Redemption Price Per Unit
Redemption Price per Unit is computed by the Trustee as of the Evaluation
Time on each June 30 and December 31 (or the last business day prior thereto),
as of the Evaluation Time next following the tender of any Unit for redemption
on any Tender Day, and on any other business day desired by the Trustee or the
Sponsor, by adding (1) the aggregate value of the Securities determined by the
Trustee, (2) amounts in 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
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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. Therefore,
the amount of the Redemption 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 public offering
period.
The aggregate value of the Securities shall be determined by the Trustee in
good faith in the following manner: if the Securities are listed on a national
securities exchange or NASDAQ National Market System, or a foreign securities
exchange, such evaluation shall generally be based on the closing sale price on
such exchange (unless the Trustee deems such price inappropriate as a basis for
evaluation) or, if there is no closing sale price on such exchange, at the mean
between the closing offering and bid side evaluation. If the Securities are not
so listed or, if so listed and the principal market therefor is other than on
such exchange, such evaluation shall generally be made by the Trustee in good
faith based at the mean between current bid and offer prices on the over-the-
counter market (unless the Trustee deems such mean inappropriate as a basis for
evaluation) or, if bid and offer prices are not available, (1) on the basis of
the mean between current bid and offer prices for comparable securities, (2) by
the Trustee's appraising the value of the Securities in good faith at the mean
between the bid side and the offer side of the market or (3) by any combination
thereof.
EXPENSES AND CHARGES
Initial Expenses -- 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 added to 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 Summary of
Essential Information. The Trustee receives for its services as Trustee and
Distribution Agent payable in monthly installments, the amount set forth under
Summary of Essential Information. The Trustee's fee (in respect of services as
Trustee), payable monthly, is based on the largest number of Units outstanding
during the preceding month. Certain regular and recurring expenses of the
Trust, including certain mailing and printing expenses, are borne by the Trust.
The Trustee receives benefits to the extent that it holds funds on deposit in
the various non-interest bearing accounts created under the Indenture. The
Sponsor's fee, which is earned for trust supervisory services, is based on the
largest number of Units outstanding during the year. The Sponsor's fee, which
is not to exceed the maximum amount set forth under Summary of Essential
Information, 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 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
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the classification "All Services Less Rent" in the Consumer Price Index
published by the United States Department of Labor.
The estimated expenses set forth in the Fee Table do not include the
brokerage commissions payable by the Trust in purchasing and selling
Securities. S&P receives a fee from the Trust to cover the license by Standard
& Poor's to the Sponsor for the use of the trademarks and tradenames "Standard
& Poor's" and "S&P", as well as the license by Standard & Poor's to the Sponsor
of the Rankings for Common Stocks in connection with the selection of the A+
Strategy stocks.
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 Income
Accounts (see below); (2) to the extent the Income Account funds are
insufficient, by distribution from the Capital 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 Portfolio
and using the proceeds to pay the expenses (thereby reducing the net asset
value of the Units). Payment of the Deferred Sales Charge will be made in the
manner described under Administration of the Trust -- Accounts and
Distributions below.
Since the Securities are all common stocks, and the income stream produced by
dividend payments thereon is unpredictable (see Description of the 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 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 estimated expenses. The
first distribution for persons
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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. Therefore the adverse
financial condition of an issuer will not necessarily require the sale of its
Securities from the Portfolio. However, the Portfolio is regularly reviewed.
Traditional methods of investment management for a managed fund (such as a
mutual fund) typically involve frequent changes in a portfolio of securities on
the basis of economic, financial and market analyses. 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. Further, the Trust will likely continue to
hold a Security and purchase additional shares even if its issuer is no longer
included in the Strategic 10, is no longer ranked A+ by Standard & Poor's or
even if it is deleted from the DJIA. The Sponsor is authorized under the
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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
the 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.
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Whenever a Replacement Security has been acquired for the Trust, the Trustee
shall, on the next Distribution Day that is more than 30 days thereafter, make
a pro rata distribution of the amount, if any, by which the cost to the Trust
of the Failed Security exceeded the cost of the Replacement Security. If
Replacement Securities are not acquired, the Sponsor will, on or before the
next following Distribution Day, cause to be refunded the attributable sales
charge, plus the attributable Market Value of Securities listed under Portfolio
plus income attributable to the Failed Security. Any property received by the
Trustee after the Initial Date of Deposit as a distribution on any of the
Securities in a form other than cash or additional shares of the Securities
received in a non-taxable stock dividend or stock split, shall be retained or
disposed of by the Trustee as provided in the Indenture. The proceeds of any
disposition shall be credited to the Income or Capital Account of the Trust.
The Indenture also authorizes the Sponsor to increase the size and number of
Units of the Trust by the deposit of cash (or a letter of credit) with
instructions to purchase Additional Securities, contracts to purchase
Additional Securities, or Additional Securities in exchange for the
corresponding number of additional Units during the 90-day period subsequent to
the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on the
Initial Date of Deposit (the "Original Proportionate Relationship") is
maintained to the extent practicable. Deposits of Additional Securities
subsequent to the 90-day period following the Initial Date of Deposit must
replicate exactly the original proportionate relationship among the number of
shares of each Security comprising the Portfolio at the end of the initial 90-
day period.
With respect to deposits of cash (or a letter of credit) with instructions to
purchase Additional Securities, Additional Securities or contracts to purchase
Additional Securities, in connection with creating additional Units of the
Trust during the 90-day period following the Initial Date of Deposit, the
Sponsor may specify minimum amounts of additional Securities to be deposited or
purchased. If a deposit is not sufficient to acquire minimum amounts of each
Security, Additional Securities may be acquired in the order of the Security
most under-represented immediately before the deposit when compared to the
Original Proportionate Relationship. If Securities of an issue originally
deposited are unavailable at the time of subsequent deposit or cannot be
purchased at reasonable prices or their purchase is prohibited or restricted by
law, regulation or policies applicable to the Trust or the Sponsor, the Sponsor
may (1) deposit cash or a letter of credit with instructions to purchase the
Security when practicable (provided that it becomes available within 110 days
after the Initial Date of Deposit), (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
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after such distributions and deductions, expressed in each case both as a total
dollar amount and as a dollar amount per Unit outstanding on the last business
day of such calendar year; (2) as to the Capital Account: the disposition of
any Securities (other than pursuant to In Kind Distributions) and the net
proceeds received therefrom; the results of In Kind Distributions in connection
with redemption of Units; deductions for payment of applicable taxes and for
fees and expenses of the Trustee and counsel and certain other expenses, to the
extent that the Income Account is insufficient, and the balance remaining after
such distribution and deductions, expressed both as a total dollar amount and
as a dollar amount per Unit outstanding on the last business day of such
calendar year; (3) a list of the Securities held and the number of Units
outstanding on the last business day of such calendar year; (4) the Redemption
Price per Unit based upon the last computation thereof made during such
calendar year; and (5) amounts actually distributed during such calendar year
from the Income Account expressed both as total dollar amounts and as dollar
amounts per Unit outstanding on the record dates for such distributions.
In order to enable them to comply with federal and state tax reporting
requirements, Holders will be furnished with evaluations of Securities upon
request to the Trustee.
Book-Entry Units
Ownership of Units of 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 purchases and sale
from the broker-dealer or bank from whom their purchase was made. Units are
transferable by making a written request properly accompanied by a written
instrument or instruments of transfer which should be sent registered or
certified mail for the protection of the Unit Holder. Holders must sign such
written request exactly as their names appear on the records of the 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
Summary of Essential Information. The Indenture
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may also be terminated by the Sponsor if the value of the Trust is less than
the minimum value set forth under Summary of Essential Information (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.
EXCHANGE AND ROLLOVER PRIVILEGES
Holders may exchange their Units of the Trust into units of any then
outstanding series of Equity Focus Trusts, Theme Investing 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 be able
to reinvest their terminating distributions into units of a subsequent series
of Equity Focus Trusts, Theme Investing 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. Holders will pay their share of any
brokerage commissions on the sale of underlying Securities when their Units are
liquidated during the exchange or rollover. Exercise of the exchange or
rollover privilege by Holders is subject to the following conditions: (i) the
Sponsor must have units available of an Exchange Series or New Series during
initial public offering or, if such period is completed, must be maintaining a
secondary market in the units of the available Exchange Series or New Series
and such units must be available in the Sponsor's secondary market account at
the time of the Holder's elections; and (ii) exchange will be effected only in
whole units. Holders will not be permitted to advance any funds in excess of
their redemption in order to complete the exchange. Any excess proceeds
received from the Holder for exchange will be remitted to such holder.
It is expected that the terms of the Exchange Series or New Series will be
substantially the same as the terms of the Trust described in this Prospectus,
and that similar reinvestment programs will be offered with respect to all
subsequent series of the Trust. The availability of these options do not
constitute a solicitation of an offer to purchase units of an Exchange Series
or a New Series or any other security. A Holder's election to participate in
either of these options will be treated as an indication of interest only.
Holders should contact their financial professionals to find out what suitable
Exchange or New Series is available and to obtain a prospectus. Holders may
acquire units of those Series which are lawfully for sale in states where they
reside and only those Exchange Series in which the Sponsor is maintaining a
secondary market. At any time prior to the exchange by the Holder of units of
an Exchange Series, or the purchase by a Holder of units of a New Series, such
Holder may change its
29
<PAGE>
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.
REINVESTMENT PLAN
Distributions of income and/or principal, if any, on Units will be reinvested
automatically in additional Units of the Trust, subject only to the remaining
applicable Deferred Sales Charge deduction, pursuant to the Trust's
"Reinvestment Plan." If the Holder does not wish to participate in the
Reinvestment Plan and wishes to receive cash distributions, the Holder must
notify its financial consultant at Salomon Smith Barney Inc., Robinson-Humphrey
or the Trustee (depending upon whether the Units are held in street name
through Salomon Smith Barney Inc., Robinson-Humphrey or directly in the name of
the Holder, respectively), 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 it be under no liability for any action taken in
good faith in reliance on prima facie properly executed documents or for the
disposition of monies or Securities, nor shall it be liable or responsible in
any way for depreciation or loss incurred by reason of the sale of any
Security. This provision, however, shall not protect the Trustee in cases of
wilful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. In the event of the failure of the Sponsor to act, the
Trustee may act under the Indenture and shall not be liable for any of these
actions taken in good faith. The Trustee shall not be personally liable for any
taxes or other governmental charges imposed upon or in respect of the
Securities or upon the interest thereon. In addition, the Indenture contains
other customary provisions limiting the liability of the Trustee.
30
<PAGE>
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 Trust or (3) continue to
act as Trustee without terminating the Indenture.
The Sponsor shall be under no liability to the Trust or to the Holders for
taking any action or for refraining from taking any action in good faith or for
errors in judgment and shall not be liable or responsible in any way for
depreciation of any Security or Units or loss incurred in the sale of any
Security or Units. This provision, however, shall not protect the Sponsor in
cases of wilful misfeasance, bad faith, gross negligence or reckless disregard
of its obligations and duties. The Sponsor may transfer all or substantially
all of its assets to a corporation or partnership which carries on its business
and duly assumes all of its obligations under the Indenture and in such event
it shall be relieved of all further liability under the Indenture.
TAXES
The following is a general discussion of certain of the Federal income tax
consequences of the purchase, ownership and disposition of the Units by U.S.
citizens and residents and corporations organized in the United States. The
summary is limited to investors who hold the Units as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code"), 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 the Trust will be treated as
income of the Holders in the manner set forth below.
2. Each Holder will be considered the owner of a pro rata portion of each
Security in the Trust under the grantor trust rules of Sections 671-679 of
the Code. A taxable event will generally occur with respect to each Holder
when the Trust disposes of a Security (whether by sale, exchange or
redemption) or upon the sale, exchange or redemption of Units by such
Holder. 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 the Securities in the Trust in which it
holds Units (in proportion to the fair market values of those Securities on
the date the Holder purchases its Units).
3. A Holder will be considered to have received all of the dividends paid
on its pro rata portion of each Security when such dividends are received
by the Trust even if the Holder does not actually receive such
distributions but rather reinvests its dividend distributions pursuant to
the Reinvestment Plan. An individual Holder who itemizes deductions will be
entitled to deduct its pro rata share of fees and expenses paid by the
Trust, but only to the extent that this amount together with the Holder's
other miscellaneous deductions exceeds 2% of its adjusted gross income. The
deduction of fees and expenses may also be limited by Section 68 of the
Code, which reduces the amount of itemized deductions that are allowed for
individuals with incomes in excess of certain thresholds.
31
<PAGE>
4. Under the income tax laws of the State and City of New York, the Trust
is not an association taxable as a corporation and is not subject to the
New York Franchise Tax on Business Corporations or the New York City
General Corporation Tax. For a Holder who is a New York resident, however,
a pro rata portion of all or part of the income of the Trust will be
treated as income of the Holder under the income tax laws of the State and
City of New York. Similar treatment may apply in other states.
A Holder's pro rata portion of dividends paid with respect to a Security held
by the Trust is taxable as ordinary income to the extent of the issuing
corporation's current or accumulated "earnings and profits" as provided in
Section 316 of the Code. A Holder's pro rata portion of dividends paid on such
Security that exceed such current or accumulated earnings and profits will
first reduce the Holder's tax basis in such Security, and to the extent that
such dividends exceed the Holder's tax basis will generally be treated as
capital gain.
A corporate Holder will generally be entitled to a 70% dividends-received
deduction with respect to its pro rata portion of dividends received by the
Trust from a domestic corporation or from a qualifying foreign corporation in
the same manner as if such corporate Holder directly owned the Securities
paying such dividends. However, a corporate Holder should be aware that
Sections 246 and 246A of the Code impose additional limitations on the
eligibility of dividends for the 70% dividends-received deduction. These
limitations include a requirement that stock (and therefore Units) must
generally be held at least 46 days (as determined under Section 246(c) of the
Code) during the 90-day period beginning on the date that is 45 days before the
date on which the stock becomes ex-dividend. Moreover, the allowable percentage
of the deduction will be reduced from 70% if a corporate Holder owns certain
stock (or Units) the financing of which is directly attributable to
indebtedness incurred by such corporation. The dividends-received deduction is
not available to "S" corporations and certain other corporations, and is not
available for purposes of special taxes such as the accumulated earnings tax
and the personal holding company tax. Congress from time to time considers
proposals to reduce this deduction.
A Holder's gain, if any, upon the sale, exchange or redemption of Units or
the disposition of Securities held by the Trust will generally be considered a
capital gain and will be long-term if the Holder has held its Units (and the
Trust has held the Securities) for more than one year. Capital gains realized
by corporations are generally taxed at the same rates applicable to ordinary
income, although non-corporate Holders who realize long-term capital gains with
respect to Units held for more than one year may be subject to a reduced tax
rate of 20% on such gains, rather than the "regular" maximum tax rate of 39.6%.
Tax rates may increase prior to the time when Holders may realize gains from
the sale, exchange or redemption of the Units or Securities.
A Holder's loss, if any, upon the sale or redemption of Units or the
disposition of Securities held by the Trust will generally be considered a
capital loss and will be long-term if the Holder has held its Units for more
than one year. Capital losses are deductible to the extent of capital gains; in
addition, up to $3,000 of capital losses ($1,500 for married individuals filing
separately) recognized by non-corporate Holders may be deducted against
ordinary income.
A pro rata distribution of Securities by the Trustee to a Holder (or to its
agent, including the Distribution Agent) upon redemption of Units will not be a
taxable event to the Holder or to other Holders. The redeeming or exchanging
Holder's basis for such Securities will be equal to its basis for the same
Securities (previously represented by its Units) prior to such redemption or
exchange, and its holding period for such Securities will include the period
during which it held its Units. However, a Holder will have a taxable gain or
loss, which will be a capital gain or loss except in the case of a
32
<PAGE>
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.
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. Foreign taxes 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. Gains and losses attributable to increases or
decreases in the value of foreign currencies in which such securities are
denominated, or in which dividends are paid, will be treated as ordinary income
or ordinary loss. Capital gains attributable to the Units or the underlying
Securities may also be subject to taxes by certain of those jurisdictions.
The foregoing discussion relates only to the tax treatment of U.S. Holders
with regard to Federal and certain aspects of New York State and City income
taxes. Holders that are not U.S. citizens or residents ("Foreign Holders")
should be aware that dividend distributions from the Trust 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 in
general any gains realized 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 for the Trust, the Trustee will furnish to
each Holder a statement containing information relating to the dividends
received by the Trust, 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
The Trust may be well suited for purchase by Individual Retirement Accounts
("IRAs"), Keogh plans, pension funds and other qualified retirement plans.
Generally, capital gains and income received in each of the foregoing plans are
exempt from Federal taxation. All distributions from such plans (other than
from certain IRAs known as "Roth IRAs") are generally treated as ordinary
income but may, in some cases, be eligible for special 5 or 10 year averaging
or tax-deferred rollover treatment. Holders of Units in IRAs, Keogh plans and
other tax-deferred retirement plans should consult their plan custodian as to
the appropriate disposition of distributions. Investors considering
participation in any such plan should review specific tax laws related thereto
and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Such plans are offered by
brokerage firms, including the Sponsor of this Trust, and other financial
institutions. Fees and charges with respect to such plans may vary.
Before investing in the Trust, the trustee or investment manager of an
employee benefit plan (e.g., a pension or profit sharing retirement plan)
should consider among other things (a) whether the investment is prudent under
the Employee
33
<PAGE>
Retirement Income Security Act of 1974 ("ERISA"), taking into account the needs
of the plan and all of the facts and circumstances of the investment in the
Trust; (b) whether the investment satisfies the diversification requirement of
Section 404(a)(1)(C) of ERISA; and (c) whether the assets of the Trust are
deemed "plan assets" under ERISA and the Department of Labor regulations
regarding the definition of "plan assets."
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 Securities deposited in the
Trust, the Trustee may use the services of The Depository Trust Company. These
services may include safekeeping of the Securities, computer book-entry
transfer and institutional delivery services. The Depository Trust Company is a
limited purpose trust company organized under the Banking Law of the State of
New York, a member of the Federal Reserve System and a clearing agency
registered under the Securities Exchange Act of 1934.
Legal Opinion
The legality of the Units has been passed upon by Battle Fowler LLP, 75 East
55th Street, New York, New York 10022, as special counsel for the Sponsor.
Auditors
The Statement of Financial Condition and the Portfolio included in this
Prospectus have been audited by KPMG 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 Citigroup 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.
34
<PAGE>
EQUITY FOCUS
TRUSTS
----------------------------------------------
Theme Investing Portfolio Series II
PROSPECTUS
This Prospectus does not contain all of the information with respect to the
Trust set forth in its registration statements filed with the Securities and
Exchange Commission, Washington, D.C. under the Securities Act of 1933 (file
no. 333-75711) and the Investment Company Act of 1940 (file no. 811-3491), and
to which reference is hereby made. Copies may be reviewed at the Commission or
on the internet, or obtained from the Commission at prescribed rates by:
. calling: 1-800-SEC-0330
. visiting the SEC internet address: http://www.sec.gov.
. writing: Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-6009
- --------------------------------------------------------------------------------
Index
<TABLE> Sponsor:
<S> <C>
Investment Summary 2 Salomon Smith Barney
Summary of Essential Information 5 Inc. 388 Greenwich
Independent Auditors' Report 7 Street 23rd Floor New
Statement of Financial Condition 8 York, New York 10013
Portfolio 9 (212) 816-4000
Description of the Trust 11
Risk Factors 14 Trustee:
Public Sale of Units 18 The Chase Manhattan Bank
Market for Units 20 4 New York Plaza New
Redemption 21 York, New York 10004
Expenses and Charges 23 (800) 354-6565
Administration of the Trust 24
Exchange and Rollover Privileges 29
Reinvestment Plan 30
Resignation, Removal and Limitations
on Liability 30
Taxes 31
Miscellaneous 34
</TABLE>
- --------------------------------------------------------------------------------
SALOMONSMITHBARNEY
----------------------------
A member of citigroup [LOGO]
- --------------------------------------------------------------------------------
No person is authorized to give any information or to make any representations
with respect to this Trust, not contained in this Prospectus and you should not
rely on any other information.
- --------------------------------------------------------------------------------
Salomon Smith Barney is the service mark used by Salomon Smith Barney Inc.
UT 6558
<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:
Salomon Smith Barney Inc. 2-67446
II. Information as to Officers and Directors of the
Depositor filed pursuant to Schedules A and D
of Form BD under Rules 15b1-1 and 15b3-1 of the
Securities Exchange Act of 1934:
Salomon Smith Barney Inc. 8-12324
III. Charter documents of the Depositor filed as
Exhibits to the Registration Statement on Form
S-6 under the Securities Act of 1933 (Charter,
By-Laws):
Salomon Smith Barney Inc. 33-65332, 33-36037
B.The Internal Revenue Service Employer Identification Numbers of the Sponsor
and Trustee are as follows:
Salomon Smith Barney Inc. 13-1912900
The Chase Manhattan Bank 13-4994650
</TABLE>
II-1
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
The Registration Statement on Form S-6 comprises the following papers and
documents:
The facing sheet of Form S-6.
The Cross-Reference Sheet (incorporated by reference to the Cross-
Reference Sheet to the Registration Statement of The Uncommon
Values Unit Trust, 1985 Series, 1933 Act File No. 2-97046).
The Prospectus.
Additional Information not included in the Prospectus (Part II).
The undertaking to file reports.
The signatures.
Written Consents as of the following persons:
KPMG LLP (included in Exhibit 5.1)
Battle Fowler LLP (included in Exhibit 3.1)
The following exhibits:
To be filed with Amendment to Registration Statement.
<TABLE>
<C> <C> <S>
*1.1.1 -- Form of Reference Trust Indenture.
2.1 -- Form of Standard Terms and Conditions of Trust (incorporated by
reference to Exhibit 2.1 to the Registration Statement of The
Uncommon Values Unit Trust, 1985 Series, 1933 Act File No.
33-97046).
*3.1 -- Opinion of counsel as to the legality of the securities being
issued including their consent to the use of their names under
the headings "Taxes" and "Legal Opinion" in the Prospectus.
*5.1 -- Consent of KPMG LLP to the use of their name under the heading
"Miscellaneous--Auditors" in the Prospectus.
</TABLE>
- ------------
* Filed herewith.
II-2
<PAGE>
SIGNATURES
The registrant hereby identifies Equity Focus Trusts, Theme Investing
Portfolio (Reg. No. 333-01901) for the purposes of the representations required
by Rule 487 and represents the following:
(1) That the portfolio securities deposited in the series as to which
this registration statement is being filed do not differ materially in type
or quality from those deposited in such previous series;
(2) That, except to the extent necessary to identify the specific
portfolio securities deposited in, and to provide essential information
for, the series with respect to which this registration statement is being
filed, this registration statement does not contain disclosures that differ
in any material respect from those contained in the registration statements
for such previous series as to which the effective date was determined by
the Commission or the staff; and
(3) That it has complied with Rule 460 under the Securities Act of 1933.
Pursuant to the requirements of the requirements of the Securities Act of
1933, the Registrant has duly caused this Registration Statement or Amendment
to the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized in the City of New York and State of New York on the
22nd day of April, 1999.
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 to the Registration
Statement pursuant to Powers of Attorney authorizing the person signing this
Registration Statement or Amendment to the Registration Statement to do so on
behalf of such members.
II-3
<PAGE>
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 Salomon Smith Barney Inc.:
Deryck C. Maughan
Michael A. Carpenter
/s/ Kevin Kopczynski
By___________________________________
Kevin Kopczynski
(As authorized signatory for
Salomon Smith Barney Inc. and
Attorney-in-fact for the persons
listed above)
- ------------
* Pursuant to Powers of Attorney filed as exhibits to Registration Statement
Nos. 333-62533 and 333-66875.
II-4
<PAGE>
EXHIBIT 1.1.1
EQUITY FOCUS TRUSTS - THEME INVESTING PORTFOLIO SERIES II
REFERENCE TRUST INDENTURE
Dated as of April 21, 1999
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 Trust shall be shares of common stock, which securities have
been deposited with (or assigned to) the Trustee under this Indenture. Subject
to the provisions contained in the Standard Terms and Conditions of Trust, any
new Securities deposited in the Trust Fund pursuant to Section 3.06 will be
those which, assuming consummation of the particular transaction, will maintain
the same proportionate relationship among the number of shares of each of the
various Securities in the Trust Fund as exists among the Securities in the Trust
Fund immediately preceding any such deposit or distribution, subject, however,
to any change in such proportionate relationship in accordance with Sections
3.05, 3.08, 3.11, 3.12 or 5.02.
(b) In all places in the Standard Terms and Conditions of Trust where the
words "Monthly Income Distribution" appear, these words shall be deleted and
replaced by "Income Distribution".
(c) The definition of "Distribution Agency Agreement" and all references
thereto shall be deleted.
(d) The definition of "Distribution Day" shall be deleted and replaced by
the following:
"The day designated as such in the Prospectus under the heading
'Summary of Essential Information'."
(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 April
22, 1999, in the event that the aggregate value of Securities in the Trust has
increased since the evaluation on April 21, 1999, the Trustee shall issue such
number of additional Units to the Holder of outstanding Units as of the close of
business on April 21, 1999, that the price per Unit computed as of the
Evaluation Time on April 22, 1999, plus the maximum applicable sales charge
shall equal approximately $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 April 21, 1999, there will be a
reverse split of the outstanding Units, and said Holder will surrender to the
-2-
<PAGE>
Trustee for cancellation such number of Units, that the price per Unit computed
as of the Evaluation Time on April 22, 1999 plus the maximum applicable sales
charge shall equal approximately $1 per Unit (based on the number of Units
outstanding as of said Evaluation Time, reflecting cancellation of Units
pursuant to this sentence)."
(g) The third and fourth paragraphs of Section 3.04 shall be deleted and
replaced by the following four paragraphs:
"The Income Distribution shall be calculated as follows: The Trustee
shall as of each Record Day compute the amount distributable to Holders on
the next Distribution Day (the "Income Distribution"), which amount,
subject to the limitations on the Trustee's advances set forth in Section
3.01(b), shall be equal to the cash balance of the Income Account plus any
amount receivable on obligations purchased pursuant to Section 3.06(j) on
or before the following Distribution Day less accrued and unpaid expenses
of the Trust Fund and any amounts payable from the Income Account in
respect of Units tendered for redemption prior to such Record Day divided
by the number of Units outstanding on such Record Day; provided, however,
that as of the Record Date occurring in the month of December of each
calendar year, the Trustee shall advance to the Income Account, and shall
include in the cash balance thereof, the amount of any dividends not
received as of such Record Date which are payable to the Trust Fund prior
to the end of the calendar year, and provided further that the Trustee may
increase or decrease the amount of the resulting calculation in order to
reflect the differences in Income actually received or fees, expenses,
losses, liabilities or advances actually incurred or made in any prior
period from the amounts estimated therefor. The Trustee shall withhold
from a Holder's Income Distribution any portion of the Deferred Sales
Charge deductible therefrom pursuant to Section 3.18 hereof. The Trustee
shall be entitled to be reimbursed, without interest, for any and all
amounts advanced by it pursuant to the preceding sentence, or otherwise
hereunder, from funds subsequently received by the Trust Fund as income on
any of the Securities. The Trustee shall be deemed to be the beneficial
owner of the income of the Trust Fund to the extent such income is required
to reimburse the Trustee for amounts advanced by it pursuant to this
Section and to such extent shall have a lien on the assets of the Trust
Fund prior to the interest of the Holders.
"Subject to the provisions of the succeeding two paragraphs,
distributions shall be made as follows: on or shortly after each
Distribution Day the Trustee shall distribute by check mailed to each
Holder of record at the close of business on the preceding Record Day, at
the post office address of the Holder appearing on the record books of the
Trustee or by any other means mutually agreed upon by the Holder and the
Trustee, an amount substantially equal to the Income Distribution in
respect of such Distribution Day, plus the Holder's pro rata share of the
cash balance of the Capital Account (but not including cash required to
purchase Contract Securities or held for reinvestment in Substitute
Securities pursuant to Section 3.11) computed as of the close of business
on the preceding Record Day; provided, however, that the Trustee in its
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discretion may on any Distribution
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<PAGE>
Day determine that the amount of the Income Distribution per Unit because
of any unusual or extraordinary increase or decrease in the expenses
incurred or expected to be incurred by the Trust Fund. In making the
computation of such Holder's interest in the balance of the Income Capital
Accounts, fractions of less than one cent per unit may be omitted.
"In the event that the Sponsor adopts a Reinvestment Plan the cash
distributions to Holders shall be automatically reinvested by the Sponsor
in additional Units of the Trust. Units of the Trust purchased under the
Reinvestment Plan shall be purchased at the Sponsor's Repurchase Price (the
net asset value per Unit without a sales charge) in effect at the close of
business on the Distribution Day. The Units purchased may be either
previously issued Units repurchased by the Sponsor or newly created Units
created upon the deposit of additional Securities in the Trust. The cost
of the Reinvestment Plan will be borne by the Sponsor, at no additional
cost to the Trust or individual Holders. Holders will receive an account
statement reflecting any purchase of Units under the Reinvestment Plan.
The Sponsor reserves the right to amend, modify or terminate the
Reinvestment Plan at any time without prior notice.
"A Holder may elect not to participate in the Reinvestment Plan by
notifying his financial consultant at Salomon 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:
(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
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Additional Securities to be deposited by the Sponsor on the settlement
date for such subscription or (ii) instruct the Trustee to purchase
Additional Securities with an aggregate value as specified in the
Subscription Notice.
(2) Promptly following the Evaluation Time on such Business Day, the
Sponsor shall verify with the Trustee, by telecopy, the number of
Additional Units to be created.
(3) Not later than the time on the settlement date for such
subscription when the Trustee is to deliver the Additional Units
created thereby (which time shall not be later than the time by which
the Trustee is required to settle any contracts for the purchase of
Additional Securities entered into by the Trustee pursuant to the
instruction of the Sponsor referred to in subparagraph (1) above), the
Sponsor shall deposit with the Trustee (i) any Additional Securities
specified in the Subscription Notice (or contracts to purchase such
Additional Securities together with cash or a letter of credit in the
amount necessary to settle such contracts) or (ii) cash or a letter of
credit in the amount equal to the aggregate value of the Additional
Securities specified in the Subscription Notice, together with, in
each case, cash equal to a pro rata portion of the Trust Fund Cash
Evaluation (as defined in Section 5.01(b) bearing the same ratio to
the Units created by the deposit as the Trust Fund Cash Evaluation
bears to the Units outstanding immediately prior to the deposit. Each
deposit made during the 90 days following the deposit made pursuant to
this Section 3.06 hereof shall replicate, to the extent practicable,
the original proportionate relationship among the number of shares of
each Security in the Trust Fund established on the Initial Date of
Deposit (the "Original Proportionate Relationship"), adjusted, if
appropriate, to reflect (1) the deposit of Substitute Securities
pursuant to Section 3.11, (2) sale of securities pursuant to Section
3.08, 3.12 or 5.02 and (3) the occurrence of any stock dividends,
stock splits, redemptions, acquisition of shares through dividend
reinvestment plans or similar events. Each deposit made after the 90
days following the deposit made pursuant to this Section 3.06 hereof
(except for deposits made to replace Failed Securities if such
deposits occur within 20 days from the date of a failure occurring
within such initial 90 day period) shall maintain exactly the
proportionate relationship existing among the Securities as of the
expiration of such 90 day period adjusted as provided in the preceding
sentence.
(4) On the settlement date for a subscription, the Trustee shall, in
exchange for the Securities and cash or letter of credit described
above, issue and deliver to or on the order of the Sponsor the number
of Units verified by the Sponsor with the Trustee.
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<PAGE>
(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 their purchase),
the Sponsor shall deposit with the Trustee concurrently with the
Subscription Notice cash or an irrevocable letter of credit in an
amount such that, when added to 50% of the value of the Securities
then held (determined as above) the aggregate value shall be not less
than the purchase amount of the securities to be purchased pursuant to
such Subscription Notice.
"(b) If Securities of an issue of Securities originally deposited (an
'Original Issue') are unavailable or cannot be purchased at reasonable prices or
their purchase is prohibited or restricted by law, regulation or policies
applicable to the Trust Fund or the Sponsor at the time of a subsequent deposit
under Subsection 3.06(a), in lieu of the portion of the deposit that would
otherwise be represented by those Securities, the Sponsor may (1) deposit (or
instruct the Trustee to purchase) (i) Securities of another Original Issue or
(ii) 'Replacement Securities' complying with the conditions of paragraphs (c)
and (d) of this Section, or (2) deposit cash or a letter of credit with
instructions to acquire the Securities of the Original Issue when practicable.
Any cash or letter of credit deposited under this Subsection 3.06(b) to acquire
Securities of an Original Issue or Replacement Securities
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<PAGE>
which at the end of the 90 day period following the Date of Deposit has not
been used to purchase Securities shall be used to purchase Securities in
accordance with this Subsection 3.06(b), provided that if an instruction to
purchase an Additional Security or a Replacement Security has not been
given and such cash or letter of credit remain in the Trust Fund after 110
days from the Date of Deposit, the amount thereof shall be distributed,
together with the attributable sales charge, at the time and in the manner
specified in Section 3.11 regarding failed contracts.
"(c) Replacement Securities shall meet all the conditions applicable
to Substitute Securities in Section 3.11.
"(d) In addition to the requirements specified in paragraph (c),
Replacement Security must:
"(i) be publicly-traded common stock;
"(ii) be issued by an issuer subject to or exempt from the
reporting requirements under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (or similar provision of law);
and
"(iii) have characteristics sufficiently similar to the
characteristics of the other Securities in the Trust Fund as to
be acceptable for acquisition by the Trust Fund.
"(e) The Sponsor 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
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<PAGE>
and appoint the Trustee the Sponsor's attorney in all matters respecting
such Securities with full power of substitution in the premises. The
Deposit Certificate shall include an acknowledgment by the Trustee that it
has delivered to the Sponsor the number of Units specified in the Deposit
Certificate. Any Additional Securities received by the Trustee shall be
deposited in the Trust Fund and shall be subject to the terms and
conditions of this Indenture to the same extent as the securities
originally deposited hereunder. Any contract to purchase Additional
Securities pursuant to this Section 3.06 that is declared by the Sponsor to
have failed due to reasons beyond the control of the Sponsor or the
Trustee, shall be immediately replaced by the Sponsor with a contract to
purchase Substitute Securities pursuant to Section 3.11.
"(g) The Trustee shall cause to be delivered to the Sponsor within a
reasonable period of time after the end of each calendar year a certificate
of the Trustee as to the Additional Securities received by the Trustee for
deposit in the Trust Fund and the number of Units issued in exchange
therefor, during the calendar year. Within a reasonable time after receipt
of such certificate, the Sponsor shall acknowledge in writing the receipt
of such certificate and shall certify it as complete and correct or shall
indicate to the Trustee in writing any differences between the Sponsor's
records of the Securities transactions and the issuance of Units and
Trustee's certificate.
"(h) The Trustee shall have no responsibility or liability for any
loss or depreciation resulting from any purchase made pursuant to the
Sponsor's instructions and in the absence thereof shall have no duty to
purchase any securities. The Trustee shall have no responsibility or
liability for maintaining the composition of the Trust Fund.
"(i) Cash delivered to the Trustee for purchase of Securities pursuant
to this section shall be on deposit with the Trustee or any Custodian or
sub-custodian specified in Section 8.01(a) and shall bear interest for the
benefit of the Trust Fund at the Federal Funds rate adjusted daily as
reported in the New York Times under the caption 'Key Rates'.
--------------
"(j) The Sponsor may direct the Trustee, with part or all of the
proceeds from the sale of Securities, to the extent not required for
redemption of Units, to purchase one or more debt obligations for deposit
in the Trust, provided that each such debt obligation (1) is an "Eligible
Security" as defined in paragraph (a)(5) of Rule 2a-7 pursuant to the
Investment Company Act of 1940 or in the opinion of the Sponsor has
comparable credit characteristics, and (2) has a fixed final maturity date
no later than the next Distribution Day. The proceeds from the maturity of
any said debt obligation shall be distributed to Holders on said
Distribution Day."
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<PAGE>
(i) Section 3.07(b)(2) shall be deleted and replaced by the following
paragraph:
"(2) the deductions for payment of applicable taxes and
fees and expenses of the Trustee and Sponsor and of counsel
pursuant to Section 3.10, accrued organizational expenses
and Deferred Sales Charge, if any;"
(j) Section 3.08 shall be amended to add a new paragraph (e), immediately
following paragraph (d), as follows:
"(e) that there has been a public tender offer made for a Security or
a merger or acquisition is announced affecting a Security, and that in the
opinion of the Sponsor the sale or tender of the Security is in the best
interest of the Holders."
(k) Section 3.09 shall be amended in its entirety to read as follows:
"Section 3.09. Reorganization or Similar Event. In the event that an
-------------------------------
offer by the issuer of any of the Securities or any other party shall be
made to issue new Securities in exchange or substitution for any
Securities, the Trustee shall reject such offer, except that if (1) the
issuer failed to declare or pay anticipated dividends with respect to such
Securities or (2) in the opinion of the Sponsor, given in writing to the
Trustee, the issuer will probably fail to declare or pay anticipated
dividends with respect to such Securities in the reasonably foreseeable
future, the Sponsor shall instruct the Trustee in writing to accept or
reject such offer and to take any other action with respect thereto as the
Sponsor may deem proper. However, should any exchange or substitution be
affected notwithstanding such rejection or without an initial offer, any
Securities, cash and/or property received in exchange shall be deposited
hereunder and shall be sold, if securities or property, by the Trustee
pursuant to the Sponsor's direction, unless the Sponsor advises the Trustee
to retain such securities or property. The cash then remaining shall be
distributed to Holders on the next Distribution Day not fewer than 31 days
from the date the exchange consideration was received and otherwise in the
manner set forth in Section 3.04 regarding distributions from the Capital
Account. This section shall apply, but its application shall not be
limited, to public tender offers, mergers, acquisitions, reorganizations
and recapitalization. Neither the Sponsor nor the Trustee shall be liable
to any person for action or failure to take action pursuant to the terms of
this Section 3.09."
(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."
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<PAGE>
(n) Article THREE shall be amended to add a new Section 3.16 as follows:
"SECTION 3.16. Foreign Exchange Transactions. The Sponsor shall
-----------------------------
direct the Trustee with respect to the circumstances under which foreign
exchange transactions are to be entered into and with respect to the method
whereby calculation of U.S. dollar equivalents for purpose of net asset
value computations or otherwise are to be made, in order to convert amounts
receivable in respect of Securities in foreign currencies into U.S.
dollars."
(o) Article THREE shall be amended to add a new Section 3.17 as follows:
"SECTION 3.17 Extraordinary Distributions. Any property received by
---------------------------
the Trustees after April 22, 1999 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
--------
aggregate amount in excess of $15,000 pursuant to this Section. Such
directions shall identify the Securities, if any, to be sold or distributed
in kind and shall contain, if the Trustee is directed by the Sponsor to
sell a
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<PAGE>
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; provided, however, that a Holder who sells, redeems
--------
or exchanges Units prior to the Special Redemption Date described in the
Prospectus shall not have any portion of the second year Deferred Sales
Charge of the Trust deducted from the Redemption Price payment. 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 the bid and offering sides of the market by
appraisal or (4) by any combination of the above. The Trustee may obtain
current bid and offering prices for the Securities from investment dealers
or brokers (including the Sponsor) that customarily deal in similar
securities or from any other reporting service or source of information
which the Trustee deems appropriate. With respect to any Security which is
not listed on a national
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<PAGE>
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:
"(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, plus
"(D) all other assets of the Trust; and
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"(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:
"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
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withdrawn from the Income Account to the extent funds are available for
such purpose. The balance of the Redemption Price, including Accrued Income
to the extent unavailable in the Income Account, shall be withdrawn from
the Capital Account to the extent that funds are available for such
purpose; if the available balance in the Capital Account shall be
insufficient, the Trustee shall sell Securities from among those designated
for such purpose by the Sponsor on the current list as provided in
subsection (d) below, in such amounts as shall be necessary for the
purposes of such redemption; provided, however, that no amount in the
-------- -------
Capital Account may be used for any redemption unless the Sponsor so
directs in writing. Instead, Units shall be redeemed by the Trustee's
segregating on the books of the Trust those Securities selected from among
those designated on such current list by the Sponsor for the account of the
Holder (to the extent the value thereof is equal to the Redemption Price
(less any cash distributed from the Income and Capital Accounts as directed
by the Sponsor)). The Trustee shall sell the Securities, any portion of
which have been segregated as provided below, or collect the redemption
proceeds thereof and distribute such sale or redemption proceeds (1) to the
Holder, to the extent described in the immediately preceding sentence, and
(2) to the Capital Account, to the extent of any balance of the sale or
redemption proceeds; provided that if the Sponsor contemplates any further
--------
deposit of Additional Securities into the Trust in accordance with Section
3.06, the Securities to be segregated shall be selected by the Sponsor so
as to maintain, to the extent practicable, the proportionate relationship
among the number of shares of each Security then existing. In the event
that funds are withdrawn from the Capital Account or Securities are sold
for payment of any portion of the Redemption Price representing Accrued
Income, the Capital Account shall be reimbursed when sufficient funds are
available in the Income Account. As used in this Section 5.02, "Accrued
Income" shall mean net accrued but unpaid interest on Securities or
interest earned on Funds deposited for purchase of 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
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and Capital Account from such accounts to the extent that funds are
available for such purpose.
"Upon receipt of a Redemption Distribution the Distribution Agent
shall hold such distribution for the account of the tendering Holder.
Securities shall be held in the name of the Distribution Agent or its
nominee and cash shall be held in a non-interest bearing account. Upon
receipt of proper instructions from the tendering Holder, the Distribution
Agent shall deliver the Redemption Distribution pursuant to such directions
(except that if any securities received are available only in book entry
form, unless the tendering Holder designates an agent to hold such
securities in its name which agent is, or clears through, a member of the
depository for those securities, the Distribution Agent shall sell those
securities and distribute the cash proceeds, net of transaction costs, if
any) as soon as practical, as directed by such tendering Holder upon
payment of such reasonable fees set by the Trustee or the Distribution
Agent to cover the cost of 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.
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<PAGE>
"In the event that it is necessary to sell any Securities other than
by the above means, and if the Sponsor shall so direct in writing
accompanied by any documents necessary to transfer such Securities or to
comply with transfer restrictions, if any, on such Security, the Trustee
shall transfer any such Securities to a participation trust with a trustee
selected by the Sponsor (which may include the Trustee, but the Trustee
shall have no obligation to act as such and may receive additional
compensation for so acting) to be governed by a trust indenture in exchange
for certificates of participation in such trust and shall then sell such
certificates of participation in the manner directed by the Sponsor. The
Trustee shall be entitled to receive such written notice and may act in
reliance thereon. In the event that the moneys received upon the sale of
such certificates 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
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<PAGE>
redemption other than by check, and (2) to the Trustee in the case of a
tender for redemption by check, in either case not later than the close of
business on the Redemption Date of an amount not less than the Redemption
Price which would otherwise be payable by the Trustee to such Holder. So
long as the Sponsor is maintaining a bid in the secondary market at no less
than the Redemption Price, the Sponsor will repurchase any Unit so tendered
to the Trustee for redemption. Any Unit purchased by the Sponsor from the
Trustee may at the option of the Sponsor be tendered to the Trustee for
redemption in the manner provided in subsection (a) of this Section 5.02.
The Trustee is hereby irrevocably authorized in its discretion, but without
obligation, in the event that the Sponsor does not elect to purchase any
Unit tendered to the Trustee for redemption, or in the event that a Unit is
being tendered by the Sponsor for redemption, in lieu of redeeming such
Unit, to sell such Unit in the over-the-counter market for the account of
the tendering Holder at a price which will return to the Holder an amount
in cash, net after deducting brokerage commissions, transfer taxes and
other charges, equal to or in excess of the Redemption Price which such
Holder would otherwise be entitled to receive on redemption pursuant to
this Section 5.02. The Trustee shall pay to the Holder the net proceeds of
any such sale no later than the day the Holder would otherwise be entitled
to receive payment of the Redemption Price hereunder.
"(h) Neither the 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:
"(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
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<PAGE>
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 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
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<PAGE>
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
$5,000,000."
(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."
(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.
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<PAGE>
(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
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.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Indenture
to be duly executed
SALOMON SMITH BARNEY INC.
Sponsor
By: /s/ Kevin Kopczynski
------------------------------
Senior Vice President
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<PAGE>
THE CHASE MANHATTAN BANK, Trustee
By: /s/ Arlene Lam
---------------------------------
Second Vice President
(SEAL)
ATTEST:
By: /s/ Arlene Kennedy
-------------------------
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<PAGE>
EXHIBIT 3.1
Battle Fowler LLP
Park Avenue Tower
2049 Century Park East 75 East 55th Street Cable Address
Suite 2350 New York, NY 10022-3205 "Counsellor"
Los Angeles, Ca 90067-3101 -----
Tel: (310) 788-3000 (212) 856-7000 Facsimile
Fax: (310) 277-0336 (212) 399-9150
WRITER'S DIRECT DIAL NUMBER
www.battlefowler.com
(212) 856-6914
WRITER'S DIRECT FACSIMILE NUMBER
(212) 856-7816
WRITER'S DIRECT E-MAIL
April 21, 1999
Salomon Smith Barney Inc.
Unit Trust Department
388 Greenwich Street, 23rd Floor
New York, New York 10013
Re: Equity Focus Trusts - Theme Investing Portfolio Series II
---------------------------------------------------------
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 - Theme Investing Portfolio Series II (the "Trust") in connection with
the deposit of securities (the "Securities") therein pursuant to the Trust
Agreement referred to below, by which the Trust was created and under which the
units of fractional undivided interest (the "Units") have been issued. Pursuant
to the Trust Agreement the Depositor has transferred to the Trust certain
securities and contracts to purchase certain securities together with
irrevocable letters of credit to be held by the Trustee upon the terms and
conditions set forth in the Trust Agreement. (All securities to be acquired by
the Trust are collectively referred to as the "Securities".)
In connection with our representation, we have examined the originals
or certified copies of the following documents relating to the creation of the
Trust, the deposit of the Securities and the issuance and sale of the Units:
(a) the Standard Terms and Condition of Trust dated July 2, 1985, as amended on
June 27, 1994, and the Reference Trust Indenture of even date herewith relating
to the Trust (collectively, the "Trust Agreement") between the Depositor and The
Chase Manhattan Bank as Trustee; (b) the Closing Memorandum relating to the
deposit of the Securities in the Trust; (c) the Notification of Registration on
Form N-8A and the Registration Statement on Form N-8B-2, as amended, relating to
the Trust, as filed with the Securities and Exchange Commission (the
"Commission") pursuant to the Investment Company Act of 1940 (the "1940 Act");
(d) the
<PAGE>
Salomon Smith Barney Inc. 2
April 21, 1999
Registration Statement on Form S-6 (Registration No. 333-75711) filed with the
Commission pursuant to the Securities Act of 1933 (the "1933 Act"),
Pre-Effective Amendment No. 1 thereto and Amendment No. 2 thereto (said
Registration Statement, as amended by said Amendment Nos. 1 and 2 being herein
called the "Registration Statement"); (e) the proposed form of final prospectus
(the "Prospectus") relating to the Units, which is expected to be filed with the
Commission on or about April 22, 1999; (f) resolutions of the Executive
Committees of the Depositor authorizing the execution and delivery by the
Depositor of the Trust Agreement and the consummation of the transactions
contemplated thereby; (g) the Certificates of Incorporation and By-laws of the
Depositor, each certified to by an authorized officer of the Depositor as of a
recent date; (h) a certificate of an authorized officer of the Depositor with
respect to certain factual matters contained therein ("Officers Certificate");
and (i) certificates or telegrams of public officials as to matters set forth
upon therein.
We have assumed the genuineness of all agreements, instruments and
documents submitted to us as originals and the conformity to originals of all
copies thereof submitted to us. We have also assumed the genuineness of all
signatures and the legal capacity of all persons executing agreements,
instruments and documents examined or relied upon by us.
Where matters are stated to be "to the best of our knowledge" or
"known to us," our knowledge is limited to the actual knowledge of those
attorneys in our office who have performed services for the Trust, their review
of documents provided to us by the Depositor in connection with this engagement
and inquiries of officers of the Depositor, the results of which are reflected
in the Officers Certificate. We have not independently verified the accuracy of
the matters set forth in the written statements or certificates upon which we
have relied. We have not reviewed the financial statements, compilation of the
Securities held by the Trust, or other financial or statistical data contained
in the Registration Statement and the Prospectus, as to which we understand you
have been furnished with the reports of the accountants appearing in the
Registration Statement and the Prospectus. In addition, we have made no
specific inquiry as to whether any stop order or investigatory proceedings have
been commenced with respect to the Registration Statement or the Depositor nor
have we reviewed court or governmental agency dockets.
Statements in this opinion as to the validity, binding effect and
enforceability of agreements, instruments and documents are subject: (i) to
limitations as to enforceability imposed by bankruptcy, reorganization,
moratorium, insolvency and other laws of general application relating to or
affecting the enforceability of creditors' rights, and (ii) to limitations under
equitable principles governing the availability of equitable remedies.
We are not admitted to the practice of law in any jurisdiction but the
State of New York and we do not hold ourselves out as experts in or express any
opinion as to the laws of other states or jurisdictions except as to matters of
Federal and Delaware corporate law. No opinion is
<PAGE>
Salomon Smith Barney Inc. 3
April 21, 1999
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 Unitholders of Equity Focus Trusts - Theme Investing
Portfolio Series II:
We consent to the use of our report dated April 21, 1999, included herein and to
the reference to our firm under the heading "Auditors" in the Prospectus.
/s/ KPMG
KPMG LLP
New York, New York
April 21, 1999
