<PAGE>
As filed with the Securities and Exchange Commission on October 12, 1999
Registration No.333-85699
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------
Pre-Effective Amendment No. 1
to
Form S-6
----------------
FOR REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OF SECURITIES OF UNIT INVESTMENT
TRUSTS REGISTERED ON FORM N-8B-2
----------------
A. Exact name of trust:
EQUITY FOCUS TRUSTS--CitiSector Series, 1999
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:
MICHAEL R. ROSELLA, ESQ.
LAURIE A. HESSLEIN Battle Fowler LLP
Salomon Smith Barney Inc. 75 East 55th Street
388 Greenwich Street New York, New York 10022
New York, New York 10013 (212) 856-6858
E. Title and amount of securities being registered:
An indefinite number of Units of beneficial interest pursuant to Rule 24f-2
promulgated under the Investment Company Act of 1940, as amended.
F. Proposed maximum offering price to the public of the securities being
registered:
Indefinite
G. Amount of filing fee:
No filing fee required.
H. Approximate date of proposed sale to the public:
As soon as practicable after the effective date of the registration statement.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We +
+will not sell these securities until the registration statement filed with +
+the Securities and Exchange Commission is effective. This prospectus is not +
+an offer to sell the securities and it is not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, Dated October 12, 1999
CitiSector Series, 1999
Healthcare/Biotechnology Portfolio
Internet Portfolio
Technology/Telecommunications Portfolio
A Unit Investment Trust
The CitiSector Series, 1999 consists of
three separate unit investment trusts
designated as the Healthcare/
Biotechnology Portfolio, the Internet
Portfolio and the
Technology/Telecommunications Portfolio.
Each Trust offers investors the
opportunity to purchase units
representing proportionate interests in
a portfolio of equity securities
selected by the Trust, based upon the
recommendations of Standard & Poor's
Investment Advisory Services from the
industry sector for which the particular
Trust is named. The value of the units
of each Trust will fluctuate with the
value of the underlying securities.
The minimum purchase is $250.
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 , 1999
Read and retain this Prospectus for future reference
<PAGE>
CITISECTOR SERIES, 1999
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
Use this Investment Summary to help you decide whether one or more of the three
portfolios comprising the CitiSector Series is right for you. More detailed
information can be found later in this prospectus.
Investment Objective
The Trusts each have a diversified portfolio of stocks for strong growth-
oriented investors. Dividend income is not an objective of these portfolios.
There is no guarantee that the objectives of the Trusts will be achieved.
Investment Strategy
Each Trust uses a "buy and hold" strategy with a portfolio of stocks, designed
to remain fixed over its one-year life. Unlike a mutual fund, the portfolios
are not managed; however, a security can be sold under some adverse
circumstances.
Investment Concept and Selection Process
The CitiSector Series is designed to capitalize on investment opportunities in
several specific industry sectors of the market. For this series, portfolios of
stocks in the healthcare/biotechnology, internet and
technology/telecommunications sectors will be included.
The stocks for each portfolio will be selected by the Sponsor based on stocks
identified by Standard & Poor's Investment Advisory Services (S&P), a leading
provider of financial information, analysis, investment research and
recommendations. For the most part, S&P's team of equity analysts and
strategists will identify holdings from its stock universe of about 1,200
companies on which it provides investment recommendations. Additional selection
criteria include a candidate's fundamental strength, as well as the consistency
of a company's dividend and earnings history. The individual weighting of each
security will depend on such factors as the company's market capitalization and
the strength of the S&P recommendation.
There are other considerations that will be used in the selection of stocks for
a specific portfolio. For example, the portfolios may select holdings
considered to have fundamental strength and strong recent stock performance,
but are not currently followed by S&P's analysts. An additional selection
criteria for the Healthcare portfolio could be the amount of a company's
expenditures for research and development in relation to is revenues.
"Standard & Poor's" and "S&P" are trademarks of The McGraw-Hill Companies, Inc.
and have been licensed for use by Salomon Smith Barney Inc. The Trusts are not
sponsored, managed, sold or promoted by Standard & Poor's.
Principal Risk Factors
The value of your units may increase or decrease depending on the value of the
stocks which make up each portfolio. Each portfolio consists primarily of
common stocks of domestic issuers. If you invest in a portfolio, you should
understand the potential risks associated with common stocks:
. The financial condition of the issuer may worsen.
. The overall stock market may falter.
. Common stock is continually subject to stock market fluctuations and to
volatile increases or decreases in value as market confidence in and
perceptions of issuers change.
2
<PAGE>
In addition, each portfolio's holdings are concentrated in a single, specific
industry or service sector. A Trust is considered to be "concentrated" in a
particular industry or sector when the securities in a particular industry or
sector constitute 25% or more of the total asset value of the portfolio.
Compared to the broad market, an individual sector may be more strongly
affected by:
All Portfolios
. Changes in the interest rates and general economic conditions.
. Moves in particular dominant stocks within the sector.
. Changes in government regulations.
. Rapid obsolescence of products and/or services due to scientific
advances.
. Competitive pressures and changing domestic and international demand for
a particular product (i.e. technology products and services).
Healthcare/Biotechnology Portfolio
. High cost of liability insurance.
. Price volatility due to relatively thin capitalization of companies.
Internet Portfolio
. Trading history has demonstrated extreme price and volume fluctuations.
. Reliance on laws protecting proprietary rights in products and
technology.
Technology/Telecommunications Portfolio
. Highly competitive pressures on the rates that can be charged and
pricing.
. Heavy proportionate spending on research and development.
A unit investment trust is not actively managed and a Trust will not sell
securities in response to ordinary market fluctuations. Instead securities will
not usually be sold until a Trust terminates, which could mean that the sale
price of the Trust securities may not be the highest price at which these
securities traded during the life of that Trust.
When cash or a letter of credit is deposited with instructions to purchase
securities in order to create additional units, an increase in the price of a
particular security between the time of deposit and the time the securities are
purchased will cause the units to be comprised of less of that security and
more of the remaining securities. In addition, brokerage fees incurred in
purchasing the securities will be an expense of the Trusts.
Public Offering Price
On the first day units are made available to the public, the public offering
price will be $1.00 per unit, with a minimum purchase of $250. This price is
based on the net asset value of each 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 underlying
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, a per unit amount sufficient
to reimburse the Sponsor for organization costs is added to the public offering
price.
3
<PAGE>
Market for Units
The Sponsor intends to repurchase units at a price based on the 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.
Exchange Option
During the life of a Trust, you may exchange units of one portfolio for units
of any of the other portfolios. When a Trust is about to terminate, you may
have the option to rollover your proceeds into a future portfolio, if it is
available. The initial sales charge will be waived if you decide to exchange or
rollover; however, you will be subject to the subsequent portfolio's deferred
sales charge. If you decide not to rollover your proceeds into the next
portfolio, you will receive a cash distribution after a Trust terminates.
Taxation
Your acquisition of units of a Trust will be the acquisition of an asset. In
general, dividends of a 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 a Trust will generally be
subject to information reporting and withholding taxes.
An exchange of units in one portfolio for units in another portfolio 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.
4
<PAGE>
CITISECTOR SERIES, 1999
FEE TABLE
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Public Sale of Units and
Expenses and Charges. Although each Trust is a unit investment trust rather
than a mutual fund, this information is presented to permit a comparison of
fees.
- --------------------------------------------------------------------------------
Unitholder Transaction Expenses
<TABLE>
<CAPTION>
As a % of Initial Amounts per
Public Offering Price 1,000 Units
--------------------- -----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase (as a percentage of offering
price)..................................... 1.00%* $10.00
Maximum Deferred Sales Charge............... 2.25%** 22.50
---- ------
Total...................................... 3.25% $32.50
==== ======
Maximum Sales Charge Imposed on Reinvested
Dividends ................................. 2.25%*** $22.50
==== ======
Reimbursement to Sponsor for Estimated
Organization Costs......................... . % $
==== ======
Estimated Cost of Liquidating Securities
to Meet Redemptions........................ . % $
==== ======
Estimated Annual Trust Operating Expenses
(as a percentage of average net assets)
<CAPTION>
Amounts per
As a % of Net Assets 1,000 Units
--------------------- -----------
<S> <C> <C>
Trustee's Fee............................... . % $
Maximum Sponsor's Fee....................... . % $
Other Operating Expenses.................... . %**** $
---- ------
Total...................................... . % $
==== ======
Example
<CAPTION>
Cumulative Expenses and Charges
Paid for Period:
---------------------------------
1 year
------
<S> <C> <C>
An investor would pay the following expenses
and charges on a $10,000 investment,
assuming the Trust's estimated operating
expense ratio of . % and a 5% annual
return on the investment throughout the
periods..................................... $
</TABLE>
The example 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, see Public Sale of Units--Public Offering
Price.
** The actual fee is six monthly payments of $3.75 per month per 1,000 Units,
irrespective of the purchase or redemption price, paid on each Deferred
Sales Charge Payment Date. If the Unit price exceeds $1.00 per Unit, the
deferred sales charge will be less than 2.25%; if the Unit price is less
than $1.00 per Unit, the deferred sales charge will exceed 2.25%. See Public
Sale of Units--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 2.25%
of the Public Offering Price at the time of reinvestment.
**** Includes annual licensing fees paid to the Standard & Poor's to cover a
license to use their trademarks, trade names, rankings, databases and
research.
5
<PAGE>
CITISECTOR SERIES, 1999
SUMMARY OF ESSENTIAL INFORMATION
AS OF , 1999+
Sponsor
Salomon Smith Barney Inc.
Trustee and Distribution Agent
The Chase Manhattan Bank
Portfolio Consultant
Standard & Poor's Investment Advisory Services
Deferred Sales Charge Payment Dates
The first day of each month commencing 1, 2000 through 1, 2000
Sales Charge
The sales charge consists of an initial sales charge and a 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 from the amount
invested. The deferred sales charge of approximately 2.25% is paid through a
reduction of the net asset value of the Trust by $3.75 per 1,000 units on six
Deferred Sales Charge Payment Dates. As a result, the maximum total sales
charge assessed to Holders will be 3.25% of the Public Offering Price. Upon a
repurchase, redemption or exchange of units before the final Deferred Sales
Charge Payment Date, any remaining deferred sales charge payments will be
deducted from the proceeds.
Mandatory Termination Date
, 2000, or at any earlier time by the Sponsor with the consent of Holders
of 51% of the Units then outstanding.
Distributions
Distributions of income, if any, will be made on , to Holders of
record on of each year. A final distribution will be made upon
termination of a Trust.
Record Day
of each year.
Distribution Day
of each year, and upon termination and liquidation of a 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 a Trust is less
than 40% of the aggregate net asset value of a Trust at the completion of the
initial public offering period.
Trustee's Annual Fee
$. per 1,000 Units
Sponsor's Annual Fee
Maximum of $.25 per 1,000 Units.
Portfolio Consultant's Annual Fee
$. 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.
6
<PAGE>
CITISECTOR SERIES, 1999
SUMMARY OF ESSENTIAL INFORMATION
AS OF , 1999
<TABLE>
<CAPTION>
Healthcare/ Technology/
Biotechnology Internet Telecommunications
Portfolio Portfolio Portfolio
------------- ----------- ------------------
<S> <C> <C> <C>
Portfolio
Number of issues of common
stock..........................
Number of American Depository
Receipts and/or Shares.........
Initial Number of Units...........
Fractional Undivided Interest in
Trust Represented by Each Unit... 1/ 1/ 1/
Public Offering Price per 1,000
Units............................
Aggregate Value of Securities in
Trust.......................... $ $ $
=========== =========== ===========
Divided by Number of Units of
Trust (times 1,000)............ $ $ $
Plus Initial Sales Charge of
1.00% of Public Offering Price
(1.010% of the net amount
invested in Securities)........ $ $ $
----------- ----------- -----------
Public Offering Price........... $ $ $
Plus Estimated Organization
Costs.......................... $ $ $
Plus the amount in the Income
and Capital Accounts........... $ $ $
----------- ----------- -----------
Total........................... $ $ $
=========== =========== ===========
Sponsor's Repurchase Price and
Redemption
Price per 1,000 Units (based on
value of underlying Securities).. $ $ $
Sponsor's Profit (Loss) on
Deposit.......................... $ $ $
</TABLE>
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee and Unitholders of CitiSector Series, 1999:
We have audited the accompanying statements of financial condition, including
the portfolios, of CitiSector Series, 1999, consisting of the
Healthcare/Biotechnology Portfolio, the Internet Portfolio and the
Technology/Telecommunications Portfolio, as of , 1999. These financial
statements are the responsibility of the Trustee (see note 1 to the statements
of financial condition). Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statements of financial condition are
free of material misstatement. An audit of a statement of financial condition
includes examining, on a test basis, evidence supporting the amounts and
disclosures in that statement of financial condition. Our procedures included
confirmation with the Trustee of an irrevocable letter of credit deposited on
, 1999, for the purchase of securities, as shown in the statements of
financial condition and portfolios of securities. An audit of a statement of
financial condition also includes assessing the accounting principles used and
significant estimates made by the Trustee, as well as evaluating the overall
statement of financial condition presentation. We believe that our audits of
the statements of financial condition provide a reasonable basis for our
opinion.
In our opinion, the statements of financial condition referred to above
present fairly, in all material respects, the financial position of each of the
respective portfolios constituting CitiSector Series, 1999, as of , 1999,
in conformity with generally accepted accounting principles.
/s/ KPMG LLP
New York, New York
, 1999
8
<PAGE>
CITISECTOR SERIES, 1999
Statements of Financial Condition as of Initial Date of Deposit, , 1999
<TABLE>
<CAPTION>
Healthcare/ Technology/
Biotechnology Internet Telecommunications
Portfolio Portfolio Portfolio
TRUST PROPERTY(1) ------------- --------- ------------------
<S> <C> <C> <C>
Investment in Securities:
Contracts to purchase
Securities(2)................... $ $ $
----- ----- -----
Total............................ $ $ $
===== ===== =====
LIABILITIES
Reimbursement to Sponsor for
Organization Costs(3)............ $ $ $
Deferred Sales Charge(4)..........
Total............................
INTEREST OF UNITHOLDERS
Units of fractional undivided
interest outstanding for each
respective trust:
Cost to investors(5)..............
Less: Gross underwriting
commissions(6)...................
Less: Reimbursement to Sponsor for
Organization Costs(3) ...........
----- ----- -----
Net amount applicable to
investors........................
----- ----- -----
Total............................. $ $ $
===== ===== =====
</TABLE>
- ------------
(1) The Trustee has custody of and responsibility for all accounting and
financial books, records, financial statements and related data of each of
the Trusts and is responsible for establishing and maintaining a system of
internal controls directly related to, and designed to provide reasonable
assurance as to the integrity and reliability of, financial reporting of
each of the Trusts. The Trustee is also responsible for all estimates and
accruals reflected in each of the Trusts' financial statements other than
estimates of organizational costs, for which the Sponsor is responsible.
(2) Aggregate cost to each Trust of the Securities listed under Portfolio of
such Trust, on the Initial Date of Deposit, is determined by the Trustee on
the basis set forth in footnote 3 to the Portfolios. See also the columns
headed Market Value of Securities. An irrevocable letter of credit in the
amount of $ has been deposited with the Trustee for the purchase of
Securities. The letter of credit was issued by .
(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
Trusts. These costs have been estimated at $ per 1,000 Units for the
Healthcare/Biotechnology Portfolio, $ per 1,000 Units for the Internet
Portfolio, and $ per 1,000 Units for the Technology/Telecommunications
Portfolio. 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 a Trust. 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.
(4) A deferred sales charge of $22.50 per 1,000 Units is payable in six monthly
payments of $3.75 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 , 2000 the remaining portion of the 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 aggregate sales charge of 3.25% of the Public Offering
Price (3.359% of the net amount invested), although due to fluctuations in
the value of the Securities, the total maximum sales charge may be more
than 3.25% of the Public Offering Price.
9
<PAGE>
CITISECTOR SERIES, 1999
HEALTHCARE/BIOTECHNOLOGY PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, , 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Number Percentage Value of
Securities(1) Symbol of Shares(2) of Portfolio Securities(3)
- ------------- ------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
% $
------ ----
100.00% $
====== ====
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
10
<PAGE>
CITISECTOR SERIES, 1999
INTERNET PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, , 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Number Percentage Value of
Securities(1) Symbol of Shares(2) of Portfolio Securities(3)
- ------------- ------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
% $
------ ---------
100.00% $
====== =========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
11
<PAGE>
CITISECTOR SERIES, 1999
TECHNOLOGY/TELECOMMUNICATIONS PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, , 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Number Percentage Value of
Securities(1) Symbol of Shares(2) of Portfolio Securities(3)
- ------------- ------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
% $
------ -----
100.00% $
====== =====
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
12
<PAGE>
Notes to Portfolios of Securities
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on , 1999. All
contracts for domestic Securities are expected to be settled by the initial
settlement date for the purchase of Units.
(2) Per 1,000,000 Units.
(3) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on , 1999. Subsequent to the Initial
Date of Deposit, Securities are valued, for Securities quoted on a national
securities exchange or NASDAQ National Market System, or a foreign
securities exchange, at the closing sale prices, or if no price exists, at
the mean between the closing bid and offer prices, and for Securities not
so quoted, at the mean between bid and offer prices on the over-the-counter
market. See Redemption--Computation of Redemption Price Per Unit.
----------------
The following information is unaudited:
* 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.
13
<PAGE>
DESCRIPTION OF THE TRUSTS
Objective of the Trusts
The objective of the Equity Focus Trusts--CitiSector Series, 1999,
Healthcare/Biotechnology Portfolio (the "Healthcare Portfolio"), Internet
Portfolio (the "Internet Portfolio") and Technology/ Telecommunications
Portfolio (the "Technology Portfolio") is to provide investors with the
possibility of capital appreciation through a convenient and cost-effective
investment in fixed portfolios consisting of shares of the common stocks (the
"Securities") selected by the Sponsor. The Sponsor has selected for the
Healthcare, Internet and Technology Portfolios stocks which it considers to
have strong potential for capital appreciation over a period of one year
relative to risks and opportunities. The payment of dividends is not an
objective of the Healthcare, Internet and Technology Portfolios. The Healthcare
Portfolio, the Internet Portfolio and the Technology Portfolio are collectively
referred to herein as the "Trusts" or as the "Portfolios."
Achievement of each 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 Trusts may not realize as high a total
return as the theoretical performance of the underlying stocks in their
respective Portfolios.
Structure and Offering
This Series of Equity Focus Trusts--CitiSector Series consists of three
separate "unit investment trusts." Each 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 a 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 a Trust
will be issued in the amount required to satisfy purchase orders by depositing
in such Trust cash (or a bank letter of credit in lieu of cash) with
instructions to purchase Securities, contracts to purchase Securities together
with irrevocable letters of credit, or additional Securities. On each
settlement date (estimated to be three business days after the applicable date
on which Securities were deposited in a Trust), the Units will be released for
delivery to investors and the deposited Securities will be delivered to the
Trustee. As additional Units are issued by the Trusts as a result of the
deposit of cash (or a letter of credit in lieu of cash) with instructions to
purchase additional Securities, the aggregate value of the Securities in the
Trusts will be increased and the fractional undivided interest in the Trusts
represented by each Unit will be decreased. There is no limit on the time
period during which the Sponsor may continue to make additional deposits of
Securities into the Trusts.
During the 90-day period following the Initial Date of Deposit additional
deposits of cash or Securities in connection with the issuance and sale of
additional Units will maintain, to the extent practicable, the original
proportionate relationship among the number of shares of each Security in the
Portfolios of each of the Trusts. The proportionate relationship among the
Securities in each of the Trusts will be adjusted to reflect the occurrence of
a stock dividend, a stock split or a similar event which affects the capital
structure of the issuer of a Security in the Trusts but which does not affect
that Trust's percentage ownership of the common stock equity of such issuer at
the time of such event. It may not be possible to maintain the exact original
proportionate relationship among the Securities deposited on the Initial Date
of Deposit because of, among other reasons, purchase requirements, changes in
prices, brokerage commissions or unavailability of Securities. Replacement
Securities
14
<PAGE>
may be acquired under specified conditions when Securities originally deposited
are unavailable (see Administration of the Trusts--Trust Supervision). Units
may be continuously offered to the public by means of this Prospectus (see
Public Sale of Units--Public Distribution) resulting in a potential increase in
the number of Units outstanding. Deposits of Additional Securities subsequent
to the 90-day period following the Initial Date of Deposit must replicate
exactly the proportionate relationship among the number of shares of each of
the Securities comprising each of the Portfolios 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 a Trust on that day at the Evaluation Time, plus a
sales charge. The Public Offering Price for each of the Trusts will thus vary
in the future from 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 Trusts 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 each of the Trusts will have the right to
have their Units redeemed for the Securities underlying the Units (see
Redemption). If any Units are redeemed, the aggregate value of Securities in
the Trusts will be reduced and the fractional undivided interest in such Trust
represented by each remaining Unit will be increased. Units of each of the
Trusts will remain outstanding until redeemed upon request to the Trustee by
any Holder (which may include the Sponsor), or termination of the Indenture
(see Administration of the Trusts--Amendment and Termination).
The Portfolios
The CitiSector Series is designed to capitalize on investment opportunities
in specific industry sectors of the market. For this series, portfolios of
stock in the healthcare/biotechnology, internet and
technology/telecommunications sectors will be included.
The stocks for each portfolio will be selected by the Sponsor with the
assistance of Standard & Poor's ("S&P"), a leading provider of financial
information, analysis, investment research and recommendations. For the most
part, S&P's team of equity analysts and strategists will select holdings from
its stock universe of about 1,200 companies, based on a candidate's fundamental
strength, as well as the consistency of a company's dividend and earnings
history. The individual weighting of each security will depend on such factors
as the company's market capitalization and the strength of the S&P
recommendation.
There are other considerations that will be used in the selections for a
specific portfolio. For example, the Portfolios may select holdings considered
to have fundamental strength and strong recent stock performance, but are not
currently followed by S&P's analysts. An additional selection criteria for the
Healthcare portfolio could be the amount of a company's expenditures for
research and development in relation to its revenues.
There is, of course, no assurance that any of the Securities in the Trust
will appreciate in value, and indeed any or all of the Securities may
depreciate in value at any time in the future. See Risk Factors.
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The results of ownership of Units will differ from the results of ownership
of the underlying Securities of the Trusts for various reasons, including:
. sales charges and expenses of a Trust,
. the portfolios may not be fully invested at all times,
. the stocks are normally purchased or sold at prices different from the
closing price used to determine each Trust's net asset value, and
. not all stocks may be weighted in the initial proportions at all times.
Additionally, results of ownership to different Holders will vary depending on
the net asset value of the underlying Securities on the days Holders bought and
sold their Units. Of course, any purchaser of securities, including Units, will
have to pay sales charges or commissions, which will reduce his total return.
Total returns and/or average annualized returns for various periods of
previous series of Equity Focus Trusts and the Trusts may be included from time
to time in advertisements and sales literature. Trust performance may be
compared to performance of the Standard & Poor's Health Care Composite,
Standard & Poor's Technology Index and . As with other performance
data, performance comparisons should not be considered representative of a
Trust's relative performance for any future period. Advertising and sales
literature for the Trusts may also include excerpts from the Sponsor's research
reports on one or more of the stocks in the Trusts, including a brief
description of its businesses and market sector, and the basis on which the
stock was selected.
All of the domestic Securities are publicly traded either on a stock exchange
or in the over-the-counter market. Most of the contracts to purchase Securities
deposited initially in each of the Trusts are expected to settle in three
business days, in the ordinary manner for such Securities. Any foreign
Securities are publicly traded on a variety of foreign stock exchanges.
Settlement of contracts for foreign Securities varies by country and may take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
Each of the Trusts consists of such Securities as may continue to be held
from time to time in that Trust and any additional and replacement Securities
and any money market instruments acquired and held by such Trust pursuant to
the provisions of the Indenture (including the provisions with respect to the
deposit into the Trusts of Securities in connection with the sale of additional
Units to the public) together with undistributed income therefrom and
undistributed and uninvested cash realized from the disposition of Securities
(see Administration of the Trusts--Accounts and Distributions; Trust
Supervision). The Indenture authorizes, but does not require, the Trustee to
invest the net proceeds of the sale of any Securities in eligible money market
instruments to the extent that the proceeds are not required for the redemption
of Units. Any money market instruments acquired by a Trust must be held until
maturity and must mature no later than the next Distribution Day and the
proceeds distributed to Holders at that time. If sufficient Securities are not
available at what the Sponsor considers a reasonable price, excess cash
received on the creation of Units may be held in an interest-bearing account
with the Trustee until that cash can be invested in Securities. Neither the
Sponsor nor the Trustee shall be liable in any way for any default, failure or
defect in any of the Securities. However, should any contract deposited
hereunder (or to be deposited in connection with the sale of additional Units)
fail, the Sponsor shall, on or before the next following Distribution Day,
cause to be refunded the attributable sales charge, plus the attributable
Market Value of Securities listed under the Portfolio for the relevant Trust,
unless substantially all of the monies held in such Trust to cover the purchase
are reinvested in replacement Securities in accordance with the Indenture (see
Administration of the Trusts--Trust Supervision).
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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 any of the Trusts will retain for any length of
time its present size (see Redemption; Administration of the Trusts--Amendment
and Termination). For Holders who do not redeem their Units, investments in
Units of a Trust will be liquidated on the fixed date specified under Mandatory
Termination of Trust, and may be liquidated sooner if the net asset value of a
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 each of the Trusts are set forth under the
Summary of Essential Information. Because dividends on the Securities are not
received by the Trusts at a constant rate throughout the year and because the
issuers of the Securities may change the schedules or amounts or dividend
payments, any distributions, whether reinvested or paid in cash, may be more or
less than the amount of dividend income actually received by a Trust and
credited to the income account established under the Indenture (the "Income
Account") as of the Record Day.
RISK FACTORS
Common Stock
An investment in Units entails certain risks associated with any investment
in common stocks. For example, the financial condition of the issuers of the
Securities or the general condition of the common stock market may worsen and
the value of the Securities and therefore the value of the Units may decline.
Common stocks are especially susceptible to general stock market movements and
to volatile increases and decreases in value as market confidence in and
perceptions of the issuers change. These perceptions are based on unpredictable
factors including:
. expectations regarding government economic, monetary and fiscal policies,
. inflation and interest rates,
. economic expansion or contraction, and
. global or regional political, economic or banking crises.
The Sponsor's buying and selling of the Securities, especially during the
initial offering of Units of the Trusts or to satisfy redemptions of Units may
impact upon the value of the underlying Securities and the Units. The
publication of the list of the Securities selected for the Trusts may also
cause increased buying activity in certain of the stocks comprising each of the
Portfolios. After such announcement, investment advisory and brokerage clients
of the Sponsor and its affiliates may purchase individual Securities appearing
on the list during the course of the initial offering period. Such buying
activity in the stock of these companies prior to the purchase of the
Securities by the Trusts may cause the Trusts to purchase stocks at a higher
price than those buyers who effect purchases prior to purchases by the Trust.
Each Trust's holdings will be concentrated in a single, specific industry or
service sector. Compared to the broad market, an individual sector may be more
strongly affected by:
. changes in the economic climate
.broad market shifts
.moves in particular dominant stocks, or
.regulatory changes.
Investors should be prepared for volatile short-term movement in the value of
Units.
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Shareholders of common stocks have rights to receive payments from the
issuers of those common stocks that are generally inferior to those of
creditors or holders of debt obligations or preferred stocks of such issuers.
Shareholders of common stocks of the type held by the Trusts have a right to
receive dividends only when, 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. Dividends on cumulative preferred
stock must be paid before any dividends are paid on common stock and any
cumulative preferred stock dividend which has been omitted is added to future
dividends payable to the holders of such cumulative preferred stock. Preferred
stocks are also entitled to rights on liquidation which are senior to those of
common stocks. For these reasons, preferred stocks generally entail less risk
than common stock.
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 economic interest of holders of common stock with respect to assets of the
issuer upon liquidation or bankruptcy. Further, unlike debt securities which
typically have a stated principal amount payable at maturity, common stocks
have neither a fixed principal amount nor a maturity, and have values which are
subject to market fluctuations for as long as the common stocks remain
outstanding.
Holders will be unable to dispose of any of the Securities in the Portfolios,
as such, and will not be able to vote the Securities. As the holder of the
Securities, the Trustee will have the right to vote all of the voting stocks in
each of the Trusts and will vote in accordance with the instructions of the
Sponsor.
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 a
Trust. If dividends are insufficient to cover expenses, it is likely the
Securities will have to be sold to meet Trust expenses. See Expenses and
Charges -- Payment of Expenses. Any such sales may result in capital gains or
losses to Holders. See Taxes.
Fixed Portfolio
Investors should be aware that the Trusts are not "managed" and as a result,
the adverse financial condition of a company will not result in the elimination
of its securities from the Portfolios of each of the Trusts except under
extraordinary circumstances. Investors should note in particular that the
Securities were selected on the basis of the criteria set forth under
Objectives of the Trusts and that the Trusts may continue to purchase or hold
Securities originally selected through this process even though the evaluation
of the attractiveness of the Securities may have changed. A number of the
Securities in the Trusts 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 Trusts would be impermissible, such as to maximize return by taking
advantage of market fluctuations. See Administration of the Trusts -- Trust
Supervision. In the event a public tender offer is made for a Security or a
merger or acquisition is announced affecting a Security, the Sponsor may
instruct the Trustee to tender or sell the Security on
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the open market when, in its opinion, it is in the best interest of the holders
of the Units to do so.
Although each Portfolio is regularly reviewed and evaluated and the Sponsor
may instruct the Trustee to sell Securities under certain limited
circumstances, Securities will not be sold by the Trusts to take advantage of
market fluctuations or changes in anticipated rates of appreciation. As a
result, the amount realized upon the sale of the Securities may not be the
highest price attained by an individual Security during the life of the Trusts.
The prices of single shares of each of the Securities in the Trusts vary
widely, and the effect of a dollar of fluctuation, either higher or lower, in
stock prices will be much greater as a percentage of the lower-price stocks'
purchase price than as a percentage of the higher-price stocks' purchase price.
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 purchase Securities,
additional Securities or contracts to purchase Securities, in each instance
maintaining the original percentage relationship, subject to adjustment under
certain circumstances, among the number of shares of each Security in a Trust.
To the extent the price of a Security increases or decreases between the time
cash is deposited with instructions to purchase the Security and 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 Trusts. In addition,
brokerage fees (if any) incurred in purchasing Securities with cash deposited
with instructions to purchase the Securities will be an expense of the Trusts.
Price fluctuations between the time of deposit and the time the Securities are
purchased, and payment of brokerage fees, will affect the value of every
Holder's Units and the Income per Unit received by each of the Trusts.
Organization Costs
The Securities purchased with the portion of the Public Offering Price
intended to be used to reimburse the Sponsor for each of the Trust's
organization costs will be purchased in the same proportionate relationship as
all the Securities contained in the Trusts. Securities will be sold to
reimburse the Sponsor for each of 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 Trusts). 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 each of
the Trusts organization costs, the Trustee will sell additional Securities to
allow the Trusts 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
Trusts as existed prior to such sale.
Termination
A 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 that Trust at the completion of the initial public offering period.
Investors should note that if the net asset value of a Trust should fall below
the applicable minimum value, the Sponsor may then in its sole discretion
terminate such Trust before the Mandatory Termination Date specified in the
Summary of Essential Information.
Foreign Securities
The Trusts may hold Securities of non-U.S. issuers directly or through
American Depository
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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 volatile than those of securities of comparable domestic companies.
In addition, with respect to certain foreign countries, there is the
possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Trusts,
including the withholding of dividends. Foreign securities may be subject to
foreign government taxes that could reduce the yield on such securities. Since
the Trusts may invest in securities quoted in currencies other than the United
States dollar, changes in foreign currency exchange rates may adversely affect
the value of foreign securities in the Portfolios and the net asset value of
Units of the Trusts. Investment in foreign securities may also result in higher
expenses due to the cost of converting foreign currency to United States
dollars, the payment of fixed brokerage commissions on certain foreign
exchanges, which generally are higher than commissions on domestic exchanges,
and expenses relating to foreign custody.
In addition, for the foreign issuers that are not subject to the reporting
requirements of the Securities Exchange Act of 1934, there may be less publicly
available information than is available from a domestic issuer. Also, foreign
issuers are not necessarily subject to uniform accounting, auditing and
financial reporting standards, practices and requirements comparable to those
applicable to domestic issuers. However, the Sponsor anticipates that adequate
information will be available to allow the Sponsor to supervise the Portfolios
as set forth in Administration of the Trusts -- Trust Supervision.
On the basis of the best information available to the Sponsor at the present
time, none of the Securities is subject to exchange control restrictions under
existing law which would materially interfere with payment to the Trusts of
dividends due on, or proceeds from sale of, the Securities either because the
particular jurisdictions have not adopted any currency regulations of this type
or because the issues qualify for an exemption, or the Trusts, as an
extraterritorial investor, has qualified its purchase of the Securities as
exempt by following applicable "validation" or similar regulatory or exemptive
procedures. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely affect
payments to the Trusts.
In addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of international
securities in the Portfolios and on the ability of the Trusts to satisfy their
obligation to redeem Units tendered to the Trustee for redemption (see
Redemption).
Exchange Rate Fluctuation
In recent years, foreign exchange rates have fluctuated sharply. Income from
foreign equity securities held by the Trusts, including those underlying any
ADRs held by a Trust, would be payable in the currency of the country of their
issuance. However, the Trusts will compute their income in United States
dollars, and the computation of income will be made on the date of its receipt
by the Trusts at the foreign exchange rate in effect on that date. Therefore,
if the value of the foreign
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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 various grounds, or legislation may be enacted, with
respect to any of the Securities in the Trusts 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
Trusts or will not impair the ability of the issuers of the Securities to
achieve their business and investment goals.
Year 2000 Issue
The Trusts, like other businesses and entities, could be adversely affected
if the computer systems used by the Sponsor and Trustee or other service
providers to a Trust do not properly process and calculate date-related
information and data from and after January 1, 2000. This is commonly known as
the "Year 2000 Problem." The Sponsor and Trustee are taking steps that they
believe are reasonably designed to address the Year 2000 Problem with respect
to computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by the Trusts' other service providers. 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 each Trust. The Year 2000
Problem may thus also adversely affect issuers of the Securities contained in
the Trusts, 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.
Healthcare/Biotechnology Portfolio
Companies in the health care industry are, generally, subject to governmental
regulation and approval of their products and services, which could have a
significant effect on their price and availability. Furthermore, the types of
products or services produced or provided by these companies may quickly become
obsolete. The costs of providing health care services may increase as a result
of, among other factors, changes in medical technology and increased labor
costs. In addition, health care facility construction and operation is subject
to federal, state and local regulation relating to the adequacy of medical
care, equipment, personnel, operating policies and procedures, rate-setting,
and compliance with building codes and environmental laws. Facilities are
subject to periodic inspection by governmental and other authorities to assure
continued compliance with the various standards necessary for licensing and
accreditation. These regulatory requirements are subject to change and, to
comply, it may be necessary for a hospital or other health care facility to
incur substantial capital expenditures or increased operating expenses to
effect changes in its facilities, equipment, personnel and services.
Additionally, a number of legislative proposals concerning healthcare have
been introduced in the U.S. Congress in recent years or have been reported to
be under consideration. These proposals span a wide range of topics, including
cost controls, national health insurance, incentives for competition in the
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provision of health care services, tax incentives and penalties related to
health care insurance premiums, and promotion of prepaid healthcare plans. Any
of these proposals, if enacted, may have an adverse effect on the health care
industry.
The biotechnology sector of the healthcare industry faces certain additional
risks. Biotechnology companies need to price drugs to cover costs. Increased
competition, managed care, larger provider networks and a planned medicare
program may make it difficult to raise prices, and in fact, may result in price
discounting. This sector is also subject to costs arising out of its regulation
by the Food and Drug Administration. Before any drug or medical device can be
sold, it must receive FDA approval. The process to obtain FDA approval has
historically been long and costly, and it is becoming increasingly difficult to
recoup these costs. Additional expenses may arise from the cost of expensive
liability insurance due to the fact that biotechnology companies face the risk
of large product liability suits.
Furthermore, the biotechnology industry is an emerging growth industry, and
therefore biotechnology companies may be thinly capitalized and more volatile
than companies with greater capitalization. Companies in this sector generally
need to retain earnings to finance their expansion, and as a result no
dividends may be paid. Additional capital may be required to market new
products on a commercial basis. Finally, biotechnology companies may be
dependent for their revenues on only a few products, and may depend on their
competitors to produce and market their products. These companies are therefore
susceptible to product obsolescence, a common problem in a rapidly developing
area like biotechnology.
Internet Portfolio
Companies in the Internet Portfolio are subject to the problems and risks
inherent in the technology sectors in general (see Technology/
Telecommunications Portfolio herein). In addition the market in which internet
companies compete is characterized by rapidly changing technology, rapid
product and service obsolescence, cyclical market patterns, intense
competition, evolving industry standards and frequent new product
introductions. The success of the issuers of the Securities depends in
substantial part on the timely and successful introduction of new products. An
unexpected change in one or more of the technologies affecting an issuer's
products or in the market for products based on a particular technology could
have a material adverse affect on an issuer's operating results. Furthermore,
there can be no assurance that the issuers of the Securities will be able to
respond in a timely manner to compete in the rapidly developing marketplace.
Based on the trading history of internet stocks, factors such as the
announcement of new products, the development of new technologies or the
general condition of the industry have caused and are likely to cause the
market price of these stocks to fluctuate substantially. In addition internet
stocks have experienced extreme price and volume fluctuations that often have
been unrelated to the operating performance of such companies. This market
volatility may adversely affect the market price of the Securities and
therefore the ability of a Unitholder to redeem Units at a price equal to or
greater than the original price paid for such Units.
Many internet companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by the issuers of the Securities to protect their proprietary
rights will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such issuers' technology. In addition, due to the
increasing public use of the internet, it is possible that other laws and
regulations may be adopted to address issues such as privacy, pricing,
characteristics, and quality of internet products and services. The adoption of
any such laws could have a material adverse impact on the Securities in the
Internet Portfolio. The above
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factors could adversely affect the value of the Trust's Units.
Technology/Telecommunications Portfolio
The Technology Portfolio's investments in securities of technology related
companies present certain risks that may not exist to the same degree in other
types of investments. Technology stocks, in general, tend to be relatively
volatile as compared to other types of investments. Any such volatility will be
reflected in the value of the Technology Portfolio's Units. The technology and
science areas may be subject to greater governmental regulation than many other
areas and changes in governmental policies and the need for regulatory
approvals may have a material adverse effect on these areas. Additionally,
companies in these areas may be subject to risks of developing technologies,
competitive pressures and other factors and are dependent upon consumer and
business acceptance as new technologies evolve. Competitive pressures may have
a significant effect on the financial condition of companies in the technology
sector. For example, if technology continues to advance at an accelerated rate,
and the number of companies and product offerings continues to expand, these
companies could become increasingly sensitive to short product cycles and
aggressive pricing. Further, companies in the technology industry spend heavily
on research and development and are subject to the risk that their products or
services may not prove commercially successful or may become obsolete quickly.
Certain companies whose securities are included in the
Technology/Telecommunications Portfolio are engaged in providing local, long-
distance and wireless services, in the manufacture of telecommunications
products and in a wide range of other activities including directory
publishing, information systems and the operation of voice, data and video
telecommunications networks.
Payment on common stocks of companies in the telecommunications industry,
including local, long-distance and cellular service, the manufacture of
telecommunications equipment, and other ancillary services, is generally
dependent upon the amount and growth of customer demand, the level of rates
permitted to be charged by regulatory authorities and the effects of inflation
on the cost of providing services and the rate of technological innovation. To
meet increasing competition, companies may have to commit substantial capital,
particularly in the formulation of new products and services using new
technology. Telecommunications companies are undergoing significant change due
to varying and evolving levels of governmental regulation or deregulation and
other factors. As a result, competitive pressures are intense and the
securities of such companies may be subject to significant price volatility.
The domestic companies in the Technology/Telecommunications Portfolio may
consist of former government owned telecommunications systems that have been
privatized in states. The Sponsor cannot predict whether such privatization
will continue in the future or what, if any, effect this will have on the
Technology Portfolio.
PUBLIC SALE OF UNITS
Public Offering Price
The Public Offering Price of the Units for each of the Trusts is computed by
adding the applicable initial sales charge to the aggregate value of the
Securities in a Trust (as determined by the Trustee) and any cash held, 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 3.25% of the Public Offering Price (3.359% of
the net amount invested in Securities); although due to fluctuations in the
Market Value of the Securities, the total maximum sales charge may be more than
3.25% of the Public Offering Price. The initial sales charge is computed by
deducting
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the deferred sales charge ($22.50 per 1,000 Units) from the aggregate sales
charge. 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
Trusts. The initial sales charge is deducted from the purchase price of a Unit
at the time of purchase and paid to the Sponsor. The deferred sales charge is a
monthly charge of $3.75 per 1,000 Units and is accrued in six monthly
installments commencing on , 2000 and will be charged to the Capital Account
on the first day of each month thereafter through 1, 2000. If a Deferred
Sales Charge Payment Date is not a business day, the payment will be charged to
the Trust on the next business day. To the extent that the entire first year
deferred sales charge of $22.50 per 1,000 Units has not been deducted at the
time of repurchase or redemption of Units prior to 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 , 1999 (the first day Units will be available to the
public) will be able to purchase Units at $1.00 each (including the initial
sales charge). To allow Units to be priced at $1.00, the Units outstanding as
of the Evaluation Time on , 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% $22.50
50,000 but less than 100,000.............. .75 .758 22.50
100,000 but less than 250,000............. .50 .503 22.50
250,000 but less than 500,000............. .25 .253 22.50
500,000 but less than 1,000,000........... 0 0 22.50
</TABLE>
For purchases of at least 1,000,000 Units or $1,000,000 or more, the total
sales charge will be 1.75% (or 1.781% of the net amount invested).
The above graduated sales charges will apply to all purchases in the
aggregate of one or more of Portfolios on any one day by the same purchaser of
Units in the amounts stated. Purchases of Units will not be aggregated with
purchases of units of any other series of Equity Focus Trusts. Units held in
the name of the spouse of the purchaser or in the name of a child of the
purchaser under 21 years of age are deemed to be registered in the name of the
purchaser for purposes of calculating the applicable sales charge. The
graduated sales charges are also applicable to a trustee or other fiduciary
purchasing securities for a single trust estate or single fiduciary account.
Valuation of Securities by the Trustee is made as of the close of business on
the New York Stock Exchange on each business day. Securities quoted on national
stock exchange or Nasdaq National Market are valued at the closing sale price,
or, if no closing sales price exists, at the mean between the closing bid and
offer prices. Securities not so quoted are valued at the mean between bid and
offer prices.
Employees of the Sponsor and its subsidiaries, affiliates and employee-
related accounts may purchase Units pursuant to employee benefit plans,
- ------------
* The reduced sales charge is also applied on a dollar basis utilizing a
breakpoint equivalent in the above table of $1,000 for 1,000 Units, etc.
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<PAGE>
at a price equal to the aggregate value of the Securities in a Trust divided by
the number of Units outstanding only subject to the applicable deferred sales
charge. Sales to these plans involve less selling effort and expense than sales
to employee groups of other companies.
Public Distribution
Units will be distributed to the public at the Public Offering Price through
the Sponsor, as sole underwriter of the Trusts, and may also be distributed
through dealers.
The Sponsor intends to qualify Units of each of the Trusts for sale in all
states of the United States where qualification is deemed necessary through the
Sponsor and dealers who are members of the
National Association of Securities Dealers, Inc. Sales to dealers, if any, will
initially be made at prices which represent a concession from the Public
Offering Price per Unit to be established at the time of sale by the Sponsor.
Underwriter's and Sponsor's Profits
The Sponsor, as sole underwriter, receives a gross underwriting commission
equal to the 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 $3.75 per 1,000
Units.
On the Initial Date of Deposit, the Sponsor also realized a profit or loss on
deposit of the Securities into each of the Trusts in the amount set forth under
Investment Summary, which equals the difference between the cost of the
Securities to a Trust (which is based on the aggregate value of the Securities
on the Date of Deposit) and the purchase price of such Securities to the
Sponsor. In the event that subsequent deposits are effected by the Sponsor with
the deposit of Securities (as opposed to cash or a letter of credit) with
respect to the sale of additional Units to the public, the Sponsor similarly
may realize a profit or loss. The Sponsor also may realize profits or sustain
losses as a result of fluctuations after the Initial Date of Deposit in the
aggregate value of the Securities and hence of the Public Offering Price
received by the Sponsor for Units. Cash, if any, made available by buyers of
Units to the Sponsor prior to the settlement dates for purchase of Units may be
used in the Sponsor's business and may be of benefit to the Sponsor.
The Sponsor also receives an annual fee at the maximum rate of $.25 per 1,000
Units for the administrative and other services which it provides during the
life of the Trusts (see Expenses and Charges--Fees). The Sponsor has not
participated as sole underwriter or manager or member of any underwriting
syndicate from which any of the Securities in the Portfolios on the Initial
Date of Deposit were acquired, except as indicated under 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 a Trust,
. amounts in a Trust, including dividends receivable on stocks trading ex-
dividend, and
. all other assets in a Trust.
25
<PAGE>
deducting therefrom the sum of:
. taxes or other governmental charges against a Trust not previously
deducted,
. accrued fees and expenses of the Trustee (including legal and auditing
expenses), the Sponsor and counsel to a Trust and certain other expenses,
and
. 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 Portfolios or of the Units. On any given day, however, the
price offered by the Sponsor for the purchase of Units shall be an amount not
less than the Redemption Price per Unit, based on the aggregate value of
Securities in a Trust on the date on which the Units of such Trust are tendered
for redemption (see Redemption).
The Sponsor may, of course, redeem any Units it has purchased in the
secondary market to the extent that it determines that it is undesirable to
continue to hold such Units in its inventory. Factors which the Sponsor will
consider in making such a determination will include the number of units of all
series of unit trusts which it has in its inventory, the saleability of such
units and its estimate of the time required to sell such units and general
market conditions. For a description of certain consequences of such redemption
for the remaining Holders, see Redemption.
REDEMPTION
Units may be redeemed by the Trustee at its corporate trust office upon
payment of any relevant tax without any other fee, accompanied by a written
instrument or instruments of transfer with the signature guaranteed by a
national bank or trust company, a member firm of any of the New York, Midwest
or Pacific Stock Exchanges, or in such other manner as may be acceptable to the
Trustee. In certain instances the Trustee may require additional documents such
as, but not limited to, trust instruments, certificates of death, appointments
as executor or administrator or certificates of corporate authority.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts to meet redemptions (see Administration of the Trusts -- Accounts and
Distribution). The Securities to be sold will be selected by the Trustee from
those designated on the current list provided by the Sponsor for this purpose.
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 Trusts. 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 100,000 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
26
<PAGE>
Distribution") will take the form of the distribution of whole and fractional
shares of each of the Securities in the amounts and the appropriate proportions
represented by the fractional undivided interest in a Trust of the Units
tendered for redemption (based upon the Redemption Price per Unit).
In Kind Distributions on redemption of a minimum of 100,000 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 the Sponsor on behalf of any Holder to
obtain this more favorable price for the Holder.
(b) If the tendering Holder requests distribution in kind, the
Distribution Agent (or the Sponsor acting on behalf of the Distribution
Agent) shall sell any portion of the In Kind Distribution represented by
fractional interests in accordance with the foregoing and distribute net
cash proceeds to the tendering Holder together with certificates
representing whole shares of each of the Securities that comprise the In
Kind Distribution. (The Trustee may, however, offer the Sponsor the
opportunity to purchase the tendered Units in exchange for the numbers of
shares of each Security and cash, if any, which the Holder is entitled to
receive. The tax consequences to the Holder would be identical in either
case.)
Any amounts paid on redemption representing income received will be withdrawn
from the Income Account to the extent funds are available (an explanation of
such Account is set forth under Administration of the Trusts -- Accounts and
Distributions). In addition, in implementing the redemption procedures
described above, the Trustee and the Distribution Agent shall make any
adjustments necessary to reflect differences between the Redemption Price of
the Units and the value of the In Kind Distribution as of the date of tender.
To the extent that Securities are distributed in kind, the size of 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 a Trust including dividends
27
<PAGE>
receivable on stocks trading ex-dividend (with appropriate adjustments to
reflect monthly distributions made to Holders) and (3) all other assets in a
Trust; deducting therefrom the sum of (a) taxes or other governmental charges
against the Trust not previously deducted, (b) accrued fees and expenses of the
Trustee (including legal and auditing expenses), the Sponsor and counsel to a
Trust and certain other expenses and (c) amounts for distribution to Holders of
record as of a date prior to the evaluation; and dividing the result of such
computation by the number of Units outstanding as of the date thereof. 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
Trusts including the cost of the initial preparation, printing and execution of
the registration statement and the indenture, Federal and State registration
fees, the initial fees and expenses of the Trustee, legal expenses and any
other out-of-pocket costs. The estimated organization costs will be paid from
the assets of a 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 a 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 Trusts, as well as advertising and selling expenses, will
be paid by the Underwriters at no cost to the Trusts.
Fees -- The Trustee's and Sponsor's fees are set forth under 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
Trusts, including certain mailing and printing expenses, are borne by the
Trusts. The Trustee receives benefits to the extent that it holds funds on
deposit in the various non-interest bearing accounts created under the
Indenture.
The Sponsor's fee, which is earned for trust supervisory services, is based
on the largest number of Units outstanding during the year. The Sponsor's fee,
which is not to exceed the maximum amount set forth under Summary of Essential
Information, may exceed the actual costs of providing supervisory services for
a Trust, but at no time will the total amount the Sponsor receives for trust
supervisory
28
<PAGE>
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 Trusts in amounts not exceeding
its cost of providing those services. The fees of the Trustee and Sponsor may
be increased without approval of Holders in proportion to increases under the
classification "All Services Less Rent" in the Consumer Price Index published
by the United States Department of Labor.
Standard & Poor's receives a fee from the Trusts to cover the license by S&P
to the Sponsor for the use of the trademark and trade names "Standard & Poor's"
and "S&P", as well as the license by S&P to the Sponsor of its rankings,
database and research in connection with the selection of stocks for each
Trust's portfolio.
Other Charges -- These include: (1) fees of the Trustee for extraordinary
services (for example, making distributions due to failure of contracts for
Securities), (2) expenses of the Trustee incurred for the benefit of the Trusts
(including legal and auditing expenses) and expenses of counsel designated by
the Sponsor, (3) various governmental charges and fees and expenses for
maintaining the Trusts' registration statement current with Federal and State
authorities, (4) expenses and costs of action taken by the Sponsor, in its
discretion, or the Trustee, in its discretion, to protect the Trusts and the
rights and interests of Holders (for example, expenses in exercising the
Trusts' 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
Trusts. The amounts of these charges and fees are secured by a lien on the
Trusts.
Payment of Expenses -- Funds necessary for the payment of the above fees will
be obtained in the following manner: (1) first, by deductions from the 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 Trusts -- Accounts and
Distributions below.
Since the Securities are all common stocks, and the income stream produced by
dividend payments thereon is unpredictable (see Description of the Trusts --
Risk Factors), the Sponsor cannot provide any assurance that dividends will be
sufficient to meet any or all expenses of the Trusts. If dividends are
insufficient to cover expenses, it is likely that Securities will have to be
sold to meet Trust expenses. Any such sales may result in capital gains or
losses to Holders. See Taxes.
ADMINISTRATION OF THE TRUSTS
Records
The Trustee keeps records of the transactions of the Trusts at its corporate
trust office including names, addresses and holdings of all Holders of record,
a current list of the Securities and a copy of the Indenture. Such records are
available to Holders for inspection at reasonable times during business hours.
Accounts and Distributions
Dividends payable to a Trust are credited by the Trustee to an Income
Account, as of the date on which the Trust is entitled to receive such
dividends as a holder of record of the Securities. All other receipts (i.e.,
return of capital, stock dividends, if any, and gains) will be credited by the
Trustee to a Capital Account. If a Holder elects to receive its distribution in
cash, any income distribution for the Holder as of each Record Day will be made
on the following Distribution Day or shortly thereafter and
29
<PAGE>
shall consist of an amount equal to the Holder's pro rata share of the
distributable balance in the Income Account as of such Record Day, after
deducting estimated expenses. The first distribution for persons who purchase
Units between a Record Day and a Distribution Day will be made on the second
Distribution Day following their purchase of Units. In addition, amounts from
the Capital Account may be distributed from time to time to Holders of Record.
No distribution need be made from the Capital Account if the balance therein is
less than an amount sufficient to distribute $5.00 per 1,000 Units. The Trustee
may withdraw from the Income Account, from time to time, such amounts as it
deems requisite to establish a reserve for any taxes or other governmental
charges that may be payable out of the Trusts. Funds held by the Trustee in the
various accounts created under the Indenture do not bear interest.
Distributions of amounts necessary to pay the Deferred Sales Charge will be
made from the Capital Account to an account maintained by the Trustee for
purposes of satisfying investors' sales charge obligations. Although the
Sponsor may collect the Deferred Sales Charge monthly, to keep Units more fully
invested the Sponsor currently does not anticipate sales of Securities to pay
the Deferred Sales Charge until after the last Deferred Sales Charge Payment
Date. Proceeds of the disposition of any Securities not used to pay the
Deferred Sales Charge or to redeem Units will be held in the Capital Account
and distributed on the Final Distribution upon termination of the appropriate
Trust.
Purchases at Market Discount -- Certain of the shareholder dividend
reinvestment, stock purchase or similar plans maintained by issuers of the
Securities offer shares pursuant to such plans at a discount from market value.
Subject to any applicable regulations and plan restrictions, the Sponsor
intends to direct the Trustee to participate in any such plans to the greatest
extent possible taking into account the Securities held by the Trusts in the
issuers offering such plans. In such event, the Indenture requires that the
Trustee forthwith distribute in kind to the Distribution Agent the Securities
received upon any such reinvestment to be held for the accounts of the Holders
in proportion to their respective interests in the Trusts. It is anticipated
that Securities so distributed shall immediately be sold. Therefore, the cash
received upon such sale, after deducting sales commissions and transfer taxes,
if any, will be used for cash distributions to Holders.
The Trustee will follow a policy that it will place securities transactions
with a broker or dealer only if it expects to obtain the most favorable prices
and executions of orders. Transactions in securities held in the Trusts are
generally made in brokerage transactions (as distinguished from principal
transactions) and the Sponsor or any of its affiliates may act as brokers
therein if the Trustee expects thereby to obtain the most favorable prices and
execution. The furnishing of statistical and research information to the
Trustee by any of the securities dealers through which transactions are
executed will not be considered in placing securities transactions.
Trust Supervision
Each of the Trusts is a unit investment trust which normally follows a buy
and hold investment strategy and is not actively managed. Therefore the adverse
financial condition of an issuer will not necessarily require the sale of its
Securities from the Portfolio. However, each Portfolio is regularly reviewed.
Traditional methods of investment management for a managed fund (such as a
mutual fund) typically involve frequent changes in a portfolio of securities on
the basis of economic, financial and market analyses. However, while it is the
intention of the Sponsor to continue a Trust's investment in the Securities in
the original proportions, it has the power but not the obligation to direct the
disposition of the Securities upon institution of certain legal proceedings,
default under certain documents adversely affecting future declaration or
payment of anticipated dividends, or a substantial decline in price or the
occurrence of materially adverse credit factors that, in the opinion of the
Sponsor, would make the retention of the Securities detrimental to the
interests of the Holders. The Sponsor intends to review the desirability of
30
<PAGE>
retaining in a Portfolio any Security if its investment rating is reduced below
3 by the Sponsor's Research Department. The Sponsor is authorized under the
Indenture to direct the Trustee to invest the proceeds of any sale of
Securities not required for redemption of Units in eligible money market
instruments having fixed final maturity dates no later than the next
Distribution Day (at which time the proceeds from the maturity of said
instrument shall be distributed to Holders) which are selected by the Sponsor
and which will include only the following instruments:
(i) Negotiable certificates of deposit or time deposits of domestic banks
which are members of the Federal Deposit Insurance Corporation and which
have, together with their branches or subsidiaries, more than $2 billion in
total assets, except that certificates of deposit or time deposits of
smaller domestic banks may be held provided the deposit does not exceed the
insurance coverage on the instrument (which currently is $100,000), and
provided further that a Trust's aggregate holding of certificates of
deposit or time deposits issued by the Trustee may not exceed the insurance
coverage of such obligations and (ii) U.S. treasury notes or bills.
In the event a public tender offer is made for a Security or a merger or
acquisition is announced affecting a Security, the Sponsor may instruct the
Trustee to tender or sell the Security on the open market when in its opinion
it is in the best interest of the Holders of the Units to do so. In addition,
the Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of any of the Securities to issue new Securities in exchange or
substitution for any Securities except that the Sponsor may instruct the
Trustee to accept or reject such an offer to take any other action with respect
thereto as the Sponsor may deem proper if (1) the issuer failed to declare or
pay anticipated dividends with respect to such Securities or (2) in the written
opinion of the Sponsor the issuer will probably fail to declare or pay
anticipated dividends with respect to such Securities in the reasonably
foreseeable future. Any Securities so received in exchange or substitution
shall be sold unless the Sponsor directs that they 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 that Trust of the sale
of the Security. Except as stated in this and the following paragraphs, the
Trusts may not acquire any securities other than (1) the Securities and (2)
securities resulting from stock dividends, stock splits and other capital
changes of the issuers of the Securities.
The Sponsor is authorized to direct the Trustee to acquire replacement
Securities ("Replacement Securities") to replace any Securities, for which
purchase contracts have failed ("Failed Securities"), or, in connection with
the deposit of Additional Securities, when Securities of an issue originally
deposited are unavailable at the time of subsequent deposit, as described more
fully below. Replacement Securities that are replacing Failed Securities will
be deposited into a Trust within 110 days of the date of
deposit of the contracts that have failed at a purchase price that does not
exceed the amount of funds reserved for the purchase of Failed Securities. The
Replacement Securities shall satisfy certain conditions specified in the
Indenture including, among other conditions, requirements that the Replacement
Securities shall be publicly-traded common stocks; shall be issued by an issuer
subject to or exempt from the reporting requirements under Section 13 or 15(d)
of the Securities Exchange Act of 1934 (or similar provisions of law); shall
not result in more than 10% of a Trust consisting of securities of a single
issuer (or of two or more issuers which are Affiliated Persons as this term is
defined in the Investment Company Act of 1940) which are not registered and are
not being registered under the Securities Act of 1933 or result in a Trust
owning more than 50% of any single issue which has been registered under the
Securities Act of 1933; and shall have, in the opinion of the Sponsor,
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<PAGE>
characteristics sufficiently similar to the characteristics of the other
Securities in that Trust as to be acceptable for acquisition by such Trust.
Whenever a Replacement Security has been acquired for a Trust, the Trustee
shall, on the next Distribution Day that is more than 30 days thereafter, make
a pro rata distribution of the amount, if any, by which the cost to that Trust
of the Failed Security exceeded the cost of the Replacement Security. If
Replacement Securities are not acquired, the Sponsor will, on or before the
next following Distribution Day, cause to be refunded the attributable sales
charge, plus the attributable Market Value of Securities listed under
Portfolios plus income attributable to the Failed Security. Any property
received by the Trustee after the Initial Date of Deposit as a distribution on
any of the Securities in a form other than cash or additional shares of the
Securities received in a non-taxable stock dividend or stock split, shall be
retained or disposed of by the Trustee as provided in the Indenture. The
proceeds of any disposition shall be credited to the Income or Capital Account
of a Trust.
The Indenture also authorizes the Sponsor to increase the size and number of
Units of the Trusts by the deposit of cash (or a letter of credit) with
instructions to purchase Additional Securities, contracts to purchase
Additional Securities, or Additional Securities in exchange for the
corresponding number of additional Units during the 90-day period subsequent to
the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on the
Initial Date of Deposit (the "Original Proportionate Relationship") is
maintained to the extent practicable. Deposits of Additional Securities
subsequent to the 90-day period following the Initial Date of Deposit must
replicate exactly the original proportionate relationship among the number of
shares of each Security comprising 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 a Trust
during the 90-day period following the Initial Date of Deposit, the Sponsor may
specify minimum amounts of additional Securities to be deposited or purchased.
If a deposit is not sufficient to acquire minimum amounts of each Security,
Additional Securities may be acquired in the order of the Security most under-
represented immediately before the deposit when compared to the Original
Proportionate Relationship. If Securities of an issue originally deposited are
unavailable at the time of subsequent deposit or cannot be purchased at
reasonable prices or their purchase is prohibited or restricted by law,
regulation or policies applicable to the Trusts or the Sponsor, the Sponsor may
(1) deposit cash or a letter of credit with instructions to purchase the
Security when practicable (provided that it becomes available within 110 days
after the Initial Date of Deposit), (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
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<PAGE>
other expenses; amounts paid in connection with redemptions of Units and the
balance remaining after such distributions and deductions, expressed in each
case both as a total dollar amount and as a dollar amount per Unit outstanding
on the last business day of such calendar year; (2) as to the Capital Account:
the disposition of any Securities (other than pursuant to In Kind
Distributions) and the net proceeds received therefrom; the results of In Kind
Distributions in connection with redemption of Units; deductions for payment of
applicable taxes and for fees and expenses of the Trustee and counsel and
certain other expenses, to the extent that the Income Account is insufficient,
and the balance remaining after such distribution and deductions, expressed
both as a total dollar amount and as a dollar amount per Unit outstanding on
the last business day of such calendar year; (3) a list of the Securities held
and the number of Units outstanding on the last business day of such calendar
year; (4) the Redemption Price per Unit based upon the last computation thereof
made during such calendar year; and (5) amounts actually distributed during
such calendar year from the Income Account expressed both as total dollar
amounts and as dollar amounts per Unit outstanding on the record dates for such
distributions.
In order to enable them to comply with federal and state tax reporting
requirements, Holders will be furnished with evaluations of Securities upon
request to the Trustee.
Book-Entry Units
Ownership of Units of each Trust will not be evidenced by certificates. All
evidence of ownership of the Units will be recorded in book-entry form either
at Depository Trust Company ("DTC") through an investor's broker's account or
through registration of the Units on the books of the Trustee. Units held
through DTC will be deposited by the Sponsor with DTC in the Sponsor's DTC
account and registered in the nominee name CEDE & CO. Individual purchases of
beneficial ownership interest in a Trust will be made in book-entry form
through DTC or the Trustee. Ownership and transfer of Units will be evidenced
and accomplished by book-entries made by DTC and its participants if the Units
are evidenced at DTC, or otherwise will be evidenced and accomplished by book-
entries made by the Trustee. DTC will record ownership and transfer of the
Units among DTC participants and forward all notices and credit all payments
received in respect of the Units held by the DTC participants. Beneficial
owners of Units will receive written confirmation of their purchases and sale
from the broker-dealer or bank from whom their purchase was made. Units are
transferable by making a written request properly accompanied by a written
instrument or instruments of transfer which should be sent registered or
certified mail for the protection of the Unit Holder. Holders must sign such
written request exactly as their names appear on the records of the Trusts.
Such signatures must be guaranteed by a commercial bank or trust company,
savings and loan association or by a member firm of a national securities
exchange.
Amendment And Termination
The Sponsor may amend the Indenture, with the consent of the Trustee but
without the consent of any of the Holders, (1) to cure any ambiguity or to
correct or supplement any provision thereof which may be defective or
inconsistent, (2) to change any provision thereof as may be required by the SEC
or any successor governmental agency and (3) to make such other provisions as
shall not materially adversely affect the interest of the Holders (as
determined in good faith by the Sponsor). The Indenture may also be amended in
any respect by the Sponsor and the Trustee, or any of the provisions thereof
may be waived, with the consent of the Holders of 51% of the Units, provided
that no such amendment or waiver will reduce the interest in a Trust of any
Holder without the consent of such Holder or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of all
Holders.
The Indenture will terminate upon the earlier of the disposition of the last
Security held thereunder
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<PAGE>
or the Mandatory Termination Date specified under Summary of Essential
Information. The Indenture 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 Trusts -- Risk
Factors) and may be terminated at any time by written instrument executed by
the Sponsor and consented to by Holders of 51% of the Units. The Trustee shall
deliver written notice of any termination to each Holder of record within a
reasonable period of time prior to the termination. Within a reasonable period
of time after such termination, the Trustee must sell all of the Securities
then held and distribute to each Holder, after deductions of accrued and unpaid
fees, taxes and governmental and other charges, such Holder's interest in the
Income and Capital Accounts. Such distribution will normally be made by mailing
a check in the amount of each Holder's interest in such accounts to the address
of such nominee Holder appearing on the record books of the Trustee.
EXCHANGE AND ROLLOVER PRIVILEGES
Holders may exchange their Units of a Trust into units of any then
outstanding series of CitiSector Series (an "Exchange Series") at their
relative net asset values, subject only to the remaining deferred sales charge
(as disclosed in the prospectus for the Exchange Series).
Holders who retain their Units until the termination of a Trust may be able
to reinvest their terminating distributions into units of a subsequent series
of CitiSector Series (the "New Series") provided one is offered. Such purchaser
may be entitled to a reduced sales load (as disclosed in the prospectus for the
New Series) upon the purchase of units of the New Series.
Under the exchange and rollover privilege, the Sponsor's repurchase price
would be based upon the market value of the Securities in a Trust portfolio and
units in the Exchange Series or New Series will be sold to the Holder at a
price based on the aggregate market price of the securities in the portfolio of
the Exchange Series or New Series. 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 Trusts described in this Prospectus,
and that similar reinvestment programs will be offered with respect to all
subsequent series of the Trusts. The availability of these options do not
constitute a solicitation of an offer to purchase units of an Exchange Series
or a New Series or any other security. A Holder's election to participate in
either of these options will be treated as an indication of interest only.
Holders should contact their financial professionals to find out what suitable
Exchange or New Series is available and to obtain a prospectus. Holders may
acquire units of those Series which are lawfully for sale in states where they
reside and only those Exchange Series in which the Sponsor is maintaining a
secondary market. At any time prior to the exchange by the Holder of units of
an Exchange Series, or the purchase by a Holder of units of a New Series, such
Holder may change its investment strategy and receive its terminating
distribution. An election of either of these options will not prevent the
holder from recognizing taxable gain or loss (except in the case of loss, if
and to the extent the Exchange or New Series, as the case may be, is treated as
substantially
34
<PAGE>
identical to a Trust) as a result of the liquidation, even though no cash will
be distributed to pay any taxes. Holders should consult their own tax advisers
in this regard. The Sponsor reserves the right to modify, suspend or terminate
either or both of these reinvestment privileges at any time.
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
Trustee
The Trustee or any successor may resign upon notice to the Sponsor. The
Trustee may be removed upon the direction of the Holders of 51% of the Units of
a trust at any time, or by the Sponsor without the consent of any of the
Holders if the Trustee becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor. In case
of such resignation or removal the Sponsor is to use its best efforts to
appoint a successor promptly and if upon resignation of the Trustee no
successor has accepted appointment within thirty days after notification, the
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Trustee shall be under no liability for any action taken in good
faith in reliance on prima facie properly executed documents or for the
disposition of monies or Securities, nor shall it be liable or responsible in
any way for depreciation or loss incurred by reason of the sale of any
Security. This provision, however, shall not protect the Trustee in cases of
wilful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations and duties. In the event of the failure of the Sponsor to act, the
Trustee may act under the Indenture and shall not be liable for any of these
actions taken in good faith. The Trustee shall not be personally liable for any
taxes or other governmental charges imposed upon or in respect of the
Securities or upon the interest thereon. In addition, the Indenture contains
other customary provisions limiting the liability of the Trustee.
Sponsor
The Sponsor may resign at any time if a successor Sponsor is appointed by the
Trustee in accordance with the Indenture. Any new Sponsor must have a minimum
net worth of $2,000,000 and must serve at rates of compensation deemed by the
Trustee to be reasonable and as may not exceed amounts prescribed by the SEC.
If the Sponsor fails to perform its duties or becomes incapable of acting or
becomes bankrupt or its affairs are taken over by public authorities, then the
Trustee may (1) appoint a successor Sponsor at rates of compensation deemed by
the Trustee to be reasonable and as may not exceed amounts prescribed by the
SEC, (2) terminate the Indentures and liquidate the Trust or (3) continue to
act as Trustee without terminating the Indenture.
The Sponsor shall be under no liability to a 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.
Portfolio Consultant
The Portfolio Consultant is Standard & Poor's Investment Advisory Services
("S&P"), a leading provider of financial information, analysis, investment
research and recommendations. The Portfolio Consultant is not a sponsor of the
Trusts. The Portfolio Consultant has been retained by the Sponsor, at the
expense of each Trust, to utilize its equity expertise to assist the Sponsor in
selecting the securities deposited in each Trust. The Portfolio
35
<PAGE>
Consultant's only responsibility with respect to each Trust, in addition to its
role in Portfolio selection, is to monitor the Securities of the Portfolios and
make recommendations to the Sponsor regarding the disposition of the Securities
held by each of the Trusts. The responsibility of monitoring the Securities of
the Portfolios means that if the Portfolio Consultant's view materially changes
regarding the appropriateness of an investment in any Security then held in a
Trust based upon the investment objectives, guidelines, terms, parameters,
policies and restrictions supplied to the Portfolio Consultant by the Sponsor,
the Portfolio Consultant will notify the Sponsor of such change to the extent
consistent with applicable legal requirements. The Sponsor is not obligated to
adhere to the recommendations of the Portfolio Consultant regarding the
disposition or selection of Securities. The Sponsor has the sole authority to
direct a Trust to dispose or acquire the Securities under the Indenture. The
Portfolio Consultant has no other responsibilities or obligations to the Trusts
or the Holders.
Investors should be aware that the Portfolio Consultant, with its affiliates,
is an investment adviser for managed investment companies and/or managed
private accounts that may have similar or different investment objectives than
each of the Trusts. Some of the Securities in the Trusts may also be owned by
these other clients of the Portfolio Consultant and its affiliates. However,
because these clients have "managed" portfolios and may have differing
investment objectives, the Portfolio Consultant may sell certain Securities for
those accounts in instances where a sale by a Trust would be impermissible,
such as a maximize return by taking advantage of market fluctuations, or
otherwise not advisable in the view of the Portfolio Consultant.
The Portfolio Consultant may resign or may be removed by the Sponsor at
anytime on sixty days' prior notice. The Sponsor shall use its best efforts to
appoint a satisfactory successor in the event that the Portfolio Consultant
resigns or is removed. Such resignation or removal shall become effective upon
the acceptance of appointment by the successor Portfolio Consultant. If upon
resignation of the Portfolio Consultant no successor has accepted appointment
within sixty days after notice of resignation, the Sponsor has agreed to
perform this function.
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 Trusts are not associations taxable as a corporation for Federal
income tax purposes, and income received by the Trusts will be treated as
income of the Holders in the manner set forth below.
2. Each Holder will be considered the owner of a pro rata portion of each
Security in a Trust under the grantor trust rules of Sections 671-679 of
the Code. A taxable event will generally occur with respect to each Holder
when a 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).
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<PAGE>
3. A Holder will be considered to have received all of the dividends paid
on its pro rata portion of each Security when such dividends are received
by a Trust even if the Holder does not actually receive such distributions
but rather reinvests its dividend distributions pursuant to the
Reinvestment Plan. An individual Holder who itemizes deductions will be
entitled to deduct its pro rata share of fees and expenses paid by a Trust,
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.
4. Under the income tax laws of the State and City of New York, the
Trusts are not associations taxable as a corporation and are 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 a 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 a 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 a 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 (and Securities) 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 a Trust will generally be considered a
capital loss 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 losses are
deductible
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<PAGE>
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 dealer, when
the Holder (or its agent, including the Distribution Agent) sells the
Securities so received in redemption, when a redeeming or exchanging Holder
receives cash in lieu of fractional shares, when the Holder sells its Units or
when the Trustee sells the Securities from a Trust.
Each of the Trusts may hold Securities or ADRs of foreign corporations. For
United States income tax purposes, a holder of ADRs is treated as though it
were holding directly the shares of the foreign corporation represented by the
ADRs. Dividends paid by foreign issuers generally will be subject to 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 a Trust may be greater than the amounts that would be withheld if
the shares were held directly by a U.S. Holder. The Trusts 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 a Trust attributable to any
dividends received by a 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 each of the Trusts, 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
These Trusts may be well suited for purchase by Individual Retirement
Accounts ("IRAs"), Keogh plans, pension funds and other qualified retirement
plans. Generally, capital gains and income received in each of the foregoing
plans are exempt from Federal taxation. All distributions from such plans
(other than from certain IRAs known as "Roth IRAs") are generally treated as
ordinary
38
<PAGE>
income but may, in some cases, be eligible for special 5 or 10 year averaging
or tax-deferred rollover treatment. Holders of Units in IRAs, Keogh plans and
other tax-deferred retirement plans should consult their plan custodian as to
the appropriate disposition of distributions. Investors considering
participation in any such plan should review specific tax laws related thereto
and should consult their attorneys or tax advisers with respect to the
establishment and maintenance of any such plan. Such plans are offered by
brokerage firms, including the Sponsor of these Trusts, and other financial
institutions. Fees and charges with respect to such plans may vary.
Before investing in a Trust, the trustee or investment manager of an employee
benefit plan (e.g., a pension or profit sharing retirement plan) should
consider among other things (a) whether the investment is prudent under the
Employee Retirement Income Security Act of 1974 ("ERISA"), taking into account
the needs of the plan and all of the facts and circumstances of the investment
in 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 Statements of Financial Condition and the Portfolios 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.
39
<PAGE>
CitiSector Series, 1999
PROSPECTUS
This Prospectus does not contain all of the information with respect to the
Trusts set forth in its registration statements filed with the Securities and
Exchange Commission, Washington, D.C. under the Securities Act of 1933 (file
no. 333-85699 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 Sponsor:
<TABLE> Salomon Smith Barney
<S> <C> Inc. 388 Greenwich
Investment Summary 2 Street 23rd Floor New
Summary of Essential Information 6 York, New York 10013
Independent Auditors' Report 8 (212) 816-4000
Statements of Financial Condition 9
Portfolios 10 Trustee:
Description of the Trusts 14
Risk Factors 17 The Chase Manhattan Bank
Public Sale of Units 23 4 New York Plaza New
Market for Units 25 York, New York 10004
Redemption 26 (800) 354-6565
Expenses and Charges 28
Administration of the Trusts 29
Exchange and Rollover Privileges 34
Resignation, Removal and Limitations
on Liability 35
Taxes 36
Miscellaneous 39
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No person is authorized to give any information or to make any representations
with respect to these Trusts, 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 6543
<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)
Portfolio Consultant (included in Exhibit 5.2)
The following exhibits:
To be filed with Amendment to Registration Statement.
<TABLE>
<C> <C> <S>
1.1.1 -- Form of Reference Trust Indenture (incorporated by reference to
Exhibit 1.1.1 to the Registration Statement of Equity Focus
Trusts--Sector Series, 1998-A, 1933 Act File No. 333-49589).
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.
*5.2 -- Consent of Portfolio Consultant to the use of their name in the
Prospectus.
</TABLE>
- ------------
* To be filed by amendment.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the requirements of the Securities Act of
1933, the Registrant has duly caused this Registration Statement or Amendment
to the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized in the City of New York and State of New York on the
12th day of October 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)
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* Pursuant to Powers of Attorney filed as exhibits to Registration Statement
No. 333-62533 and 333-66875.
II-4
