<PAGE>
PURSUANT TO RULE NO. 497(b)
REGISTRATION NO. 333-89371
EQUITY FOCUS TRUSTS
------------------------------------------------
Sector Series, 1999-B
Energy Portfolio
Financials Portfolio
Healthcare Portfolio
REIT Portfolio
Technology & Telecommunications Portfolio
A Unit Investment Trust
The Equity Focus Trusts--Sector Series, 1999-B
consists of five separate unit investment trusts
designated as the Energy Portfolio, the
Financials Portfolio, the Healthcare Portfolio,
the REIT 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
Salomon Smith Barney Equity Research from the
industry sector for which the particular Trust is
named. The value of the units of each Trust will
fluctuate with the value of the underlying
securities.
The minimum purchase is $250.
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 November 17, 1999
Read and retain this Prospectus for future reference
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
Use this Investment Summary to help you decide whether one or more of the five
portfolios comprising the Equity Focus Trusts--Sector Series, 1999-B is right
for you. More detailed information can be found later in this prospectus.
Investment Objectives
The Energy Portfolio, the Financials Portfolio and the REIT Portfolio each have
a diversified portfolio of stocks for growth and income-oriented investors.
The Healthcare Portfolio and the Technology & Telecommunications Portfolio each
have a diversified portfolio of stocks for strong growth-oriented investors.
Dividend income is not a primary 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 10-40 stocks,
designed to remain fixed over its two-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
Through the Trusts, investors can target a specific industry in the stock
market with a portfolio of stocks recommended by Salomon Smith Barney research
analysts. This series includes five portfolios, one for each of these market
sectors: Energy, Financials, Healthcare, REITs and Technology &
Telecommunications.
When combined, these industries represent more than half of the stocks of the
Standard & Poor's 500 Composite Stock Index. However, only a select group will
qualify for the sector portfolios, following this rigorous screening process by
our analysts and strategists.
Step 1. One goal in building these portfolios is to include substantially all
of the sub-industry groups that Standard & Poor's uses to categorize
the S&P 500 Composite Stock Index.
Step 2. Then, our analysts identify the stocks ranked "1" or "2" on Salomon
Smith Barney's Investment Ranking System that fall into these
categories.
Step 3. The next step is to create a "blended" portfolio made up of the
following: First, we identify for each series a selection of "core"
holdings. For the most part, these are well-established stocks that
our analysts would recommend as equity "building blocks" for a broad
spectrum of investors. To complement these stocks and round out the
portfolio, we added some more opportunistic recommendations with
somewhat higher risk/reward characteristics.
Step 4. As a final step, our research analysts establish a portfolio weighting
for each holding, based on factors such as:
. The strength of the analyst's recommendation
. The size of the company's stock market capitalization
. The recommended overall portfolio weighting of each sub-industry
group
Principal Risk Factors
The value of your units may increase or decrease depending on the value of the
stocks which make up each portfolio. The Healthcare Portfolio is not
appropriate for investors requiring high current income or conservation of
capital. In addition, the amount of dividends you receive depends on a
particular issuer's dividend policy, the financial condition of that company
and general economic conditions.
2
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
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.
. As a common stockholder, your right to receive payments of any kind
(including dividends or as a result of a liquidation or bankruptcy) from
the issuer is generally inferior to the rights of creditors, debt
holders, or preferred stockholders.
. 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.
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:
. Changes in the interest rates and general economic conditions.
. Changes in the market prices of 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).
. Changes in property values, illiquidity of real property investments and
other risks associated with the ownership of real property.
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.
3
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
INVESTMENT SUMMARY
- --------------------------------------------------------------------------------
. 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. After the initial public offering period, the repurchase and cash
redemption price of units will be reduced to reflect the estimated cost of
liquidating securities to meet the redemption.
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>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
FEE TABLE FOR ENERGY PORTFOLIO
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Public Sale of Units and
Expenses and Charges. Although each Trust is a unit investment trust rather
than a mutual fund, this information is presented to permit a comparison of
fees.
- --------------------------------------------------------------------------------
Unitholder Transaction Expenses
<TABLE>
<CAPTION>
As a % of Initial Amounts per
Public Offering Price 1,000 Units
--------------------- -----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase (as a percentage of offering
price)..................................... 1.50%* $15.00
Maximum Deferred Sales Charge............... 3.00%** 30.00
---- ------
Total...................................... 4.50% $45.00
==== ======
Maximum Sales Charge Imposed on Reinvested
Dividends ................................. 3.00%*** $30.00
==== ======
Reimbursement to Sponsor for Estimated
Organization Costs......................... .276% $ 2.79
==== ======
Estimated Cost of Liquidating Securities to
Meet Redemptions........................... .064% $ .64
==== ======
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............................... .090% $ 0.90
Maximum Portfolio Supervision, Bookkeeping
and Administrative Fees.................... .025% $ 0.25
Other Operating Expenses.................... .072% $ 0.72
---- ------
Total...................................... .187% $ 1.87
==== ======
Example
<CAPTION>
Cumulative Expenses and Charges
Paid for Period:
---------------------------------
1 year 2 years
------ -------
<S> <C> <C>
An investor would pay the following expenses
and charges on a $10,000 investment,
assuming the Trust's estimated operating
expense ratio of .187% and a 5% annual
return on the investment throughout the
periods..................................... $347 $517
</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 1.50% if the Public Offering Price
exceeds $1,000 per 1,000 Units.
** The actual fee is $1.25 per month per 1,000 Units, irrespective of the
purchase or redemption price, paid on each Deferred Sales Charge Payment
Date. If the Unit price exceeds $1.00 per Unit, the deferred sales charge
will be less than 3.00%; if the Unit price is less than $1.00 per Unit,
the deferred sales charge will exceed 3.00%.
*** Reinvested dividends will be subject only to the deferred sales charge
remaining at the time of reinvestment which may be more or less than 3.00%
of the Public Offering Price at the time of reinvestment.
5
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
FEE TABLE FOR FINANCIALS PORTFOLIO
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Public Sale of Units and
Expenses and Charges. Although each Trust is a unit investment trust rather
than a mutual fund, this information is presented to permit a comparison of
fees.
- --------------------------------------------------------------------------------
Unitholder Transaction Expenses
<TABLE>
<CAPTION>
As a % of Initial Amounts per
Public Offering Price 1,000 Units
--------------------- -----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase (as a percentage of offering
price)..................................... 1.50%* $15.00
Maximum Deferred Sales Charge............... 3.00%** 30.00
---- ------
Total...................................... 4.50% $45.00
==== ======
Maximum Sales Charge Imposed on Reinvested
Dividends ................................. 3.00%*** $30.00
==== ======
Reimbursement to Sponsor for Estimated Or-
ganization Costs........................... .184% $ 1.85
==== ======
Estimated Cost of Liquidating Securities to
Meet Redemptions........................... .066% $ .66
==== ======
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............................... .091% $ 0.90
Maximum Portfolio Supervision, Bookkeeping
and Administrative Fees.................... .025% $ 0.25
Other Operating Expenses.................... .033% $ 0.33
---- ------
Total...................................... .149% $ 1.48
==== ======
Example
<CAPTION>
Cumulative Expenses and Charges
Paid for Period:
---------------------------------
1 year 2 years
------ -------
<S> <C> <C>
An investor would pay the following expenses
and charges on a $10,000 investment,
assuming the Trust's estimated operating
expense ratio of .149% and a 5% annual
return on the investment throughout the
periods..................................... $334 $500
</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 1.50% if the Public Offering Price
exceeds $1,000 per 1,000 Units.
** The actual fee is $1.25 per month per 1,000 Units, irrespective of the
purchase or redemption price, paid on each Deferred Sales Charge Payment
Date. If the Unit price exceeds $1.00 per Unit, the deferred sales charge
will be less than 3.00%; if the Unit price is less than $1.00 per Unit,
the deferred sales charge will exceed 3.00%.
*** Reinvested dividends will be subject only to the deferred sales charge
remaining at the time of reinvestment which may be more or less than 3.00%
of the Public Offering Price at the time of reinvestment.
6
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
FEE TABLE FOR HEALTHCARE PORTFOLIO
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Public Sale of Units and
Expenses and Charges. Although each Trust is a unit investment trust rather
than a mutual fund, this information is presented to permit a comparison of
fees.
- --------------------------------------------------------------------------------
Unitholder Transaction Expenses
<TABLE>
<CAPTION>
As a % of Initial Amounts per
Public Offering Price 1,000 Units
--------------------- -----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase (as a percentage of offering
price)..................................... 1.50%* $15.00
Maximum Deferred Sales Charge............... 3.00%** 30.00
---- ------
Total...................................... 4.50% $45.00
==== ======
Maximum Sales Charge Imposed on Reinvested
Dividends ................................. 3.00%*** $30.00
==== ======
Reimbursement to Sponsor for Estimated Or-
ganization Costs........................... .185% $ 1.86
==== ======
Estimated Cost of Liquidating Securities to
Meet Redemptions........................... .058% $ .58
==== ======
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............................... .091% $ 0.90
Maximum Portfolio Supervision, Bookkeeping
and Administrative Fees.................... .025% $ 0.25
Other Operating Expenses.................... .033% $ 0.33
---- ------
Total...................................... .149% $ 1.48
==== ======
Example
<CAPTION>
Cumulative Expenses and Charges
Paid for Period:
---------------------------------
1 year 2 years
------ -------
<S> <C> <C>
An investor would pay the following expenses
and charges on a $10,000 investment,
assuming the Trust's estimated operating
expense ratio of .149% and a 5% annual
return on the investment throughout the
periods..................................... $333 $499
</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 1.50% if the Public Offering Price
exceeds $1,000 per 1,000 Units.
** The actual fee is $1.25 per month per 1,000 Units, irrespective of the
purchase or redemption price, paid on each Deferred Sales Charge Payment
Date. If the Unit price exceeds $1.00 per Unit, the deferred sales charge
will be less than 3.00%; if the Unit price is less than $1.00 per Unit,
the deferred sales charge will exceed 3.00%.
*** Reinvested dividends will be subject only to the deferred sales charge
remaining at the time of reinvestment which may be more or less than 3.00%
of the Public Offering Price at the time of reinvestment.
7
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
FEE TABLE FOR REIT PORTFOLIO
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Public Sale of Units and
Expenses and Charges. Although each Trust is a unit investment trust rather
than a mutual fund, this information is presented to permit a comparison of
fees.
- --------------------------------------------------------------------------------
Unitholder Transaction Expenses
<TABLE>
<CAPTION>
As a % of Initial Amounts per
Public Offering Price 1,000 Units
--------------------- -----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase (as a percentage of offering
price)..................................... 1.50%* $15.00
Maximum Deferred Sales Charge............... 3.00%** 30.00
---- ------
Total...................................... 4.50% $45.00
==== ======
Maximum Sales Charge Imposed on Reinvested
Dividends ................................. 3.00%*** $30.00
==== ======
Reimbursement to Sponsor for Estimated
Organization Costs......................... .278% $ 2.79
==== ======
Estimated Cost of Liquidating Securities to
Meet Redemptions........................... .179% $ 1.80
==== ======
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............................... .091% $ 0.90
Maximum Portfolio Supervision, Bookkeeping
and Administrative Fees.................... .025% $ 0.25
Other Operating Expenses.................... .073% $ 0.72
---- ------
Total...................................... .189% $ 1.87
==== ======
Example
<CAPTION>
Cumulative Expenses and Charges
Paid for Period:
---------------------------------
1 year 2 years
------ -------
<S> <C> <C>
An investor would pay the following expenses
and charges on a $10,000 investment,
assuming the Trust's estimated operating
expense ratio of .189% and a 5% annual
return on the investment throughout the
periods..................................... $347 $517
</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 1.50% if the Public Offering Price
exceeds $1,000 per 1,000 Units.
** The actual fee is $1.25 per month per 1,000 Units, irrespective of the
purchase or redemption price, paid on each Deferred Sales Charge Payment
Date. If the Unit price exceeds $1.00 per Unit, the deferred sales charge
will be less than 3.00%; if the Unit price is less than $1.00 per Unit,
the deferred sales charge will exceed 3.00%.
*** Reinvested dividends will be subject only to the deferred sales charge
remaining at the time of reinvestment which may be more or less than 3.00%
of the Public Offering Price at the time of reinvestment.
8
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
FEE TABLE FOR TECHNOLOGY & TELECOMMUNICATIONS PORTFOLIO
- --------------------------------------------------------------------------------
This Fee Table is intended to help you to understand the costs and expenses
that you will bear directly or indirectly. See Public Sale of Units and
Expenses and Charges. Although each Trust is a unit investment trust rather
than a mutual fund, this information is presented to permit a comparison of
fees.
- --------------------------------------------------------------------------------
Unitholder Transaction Expenses
<TABLE>
<CAPTION>
As a % of Initial Amounts per
Public Offering Price 1,000 Units
--------------------- -----------
<S> <C> <C>
Maximum Initial Sales Charge Imposed on
Purchase (as a percentage of offering
price)..................................... 1.50%* $15.00
Maximum Deferred Sales Charge............... 3.00%** 30.00
---- ------
Total...................................... 4.50% $45.00
==== ======
Maximum Sales Charge Imposed on Reinvested
Dividends ................................. 3.00%*** $30.00
==== ======
Reimbursement to Sponsor for Estimated Or-
ganization Costs........................... .141% $ 1.43
==== ======
Estimated Cost of Liquidating Securities to
Meet Redemptions........................... .044% $ .44
==== ======
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............................... .086% $ 0.86
Maximum Portfolio Supervision, Bookkeeping
and Administrative Fees.................... .025% $ 0.25
Other Operating Expenses.................... .023% $ 0.23
---- ------
Total...................................... .134% $ 1.34
==== ======
Example
<CAPTION>
Cumulative Expenses and Charges
Paid for Period:
---------------------------------
1 year 2 years
------ -------
<S> <C> <C>
An investor would pay the following expenses
and charges on a $10,000 investment,
assuming the Trust's estimated operating
expense ratio of .134% and a 5% annual
return on the investment throughout the
periods..................................... $328 $492
</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 1.50% if the Public Offering Price
exceeds $1,000 per 1,000 Units.
** The actual fee is $1.25 per month per 1,000 Units, irrespective of the
purchase or redemption price, paid on each Deferred Sales Charge Payment
Date. If the Unit price exceeds $1.00 per Unit, the deferred sales charge
will be less than 3.00%; if the Unit price is less than $1.00 per Unit,
the deferred sales charge will exceed 3.00%.
*** Reinvested dividends will be subject only to the deferred sales charge
remaining at the time of reinvestment which may be more or less than 3.00%
of the Public Offering Price at the time of reinvestment.
9
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
SUMMARY OF ESSENTIAL INFORMATION
AS OF NOVEMBER 16, 1999+
Sponsor
Salomon Smith Barney Inc.
Trustee and Distribution Agent
The Chase Manhattan Bank
Deferred Sales Charge Payment Dates
The first day of each month commencingDecember 1, 1999 through November 1,
2001
Sales Charge
The sales charge consists of an initial sales charge and a deferred sales
charge. The initial sales charge is computed by deducting the maximum
deferred sales charge ($30.00 per 1,000 units) from the maximum aggregate
sales charge (4.50% of the Public Offering Price). The deferred sales charge
is paid through a reduction of the net asset value of a Trust by $1.25 per
1,000 units on each Deferred Sales Charge Payment Date. If a Holder's sales
or redemption of units settles before a deferred sales charge payment date,
all future deductions of the deferred sales charge will be waived. This will
have the effect of reducing the sales charge rate for that Holder.
Mandatory Termination Date
November 31, 2001, or at any earlier time by the Sponsor with the consent of
Holders of 51% of the Units then outstanding.
Distributions
For the Energy, Financials, Healthcare and Technology Portfolios,
distributions of income, if any, will be made on November 25th, to Holders of
record on November 10th of each year. The REIT Portfolio will make
distributions of income, if any, on the 25th day of each month, to Holders of
record on the 10th of such month. Distributions will be automatically
reinvested in additional units of a Trust unless a Holder elects to receive
its distribution in cash. A final distribution will be made upon termination
of a Trust.
Record Day
November 10th of each year, except the 10th day of each month for the REIT
Portfolio.
Distribution Day
November 25th of each year, except the 25th day of each month for the REIT
Portfolio, 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
$.90 per 1,000 Units, except $.86 per 1,000 Units for the Technology
Portfolio only.
Sponsor's Annual Fee
Maximum of $.25 per 1,000 Units.
- ------------
+ The Initial Date of Deposit. The Initial 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.
10
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
SUMMARY OF ESSENTIAL INFORMATION
AS OF NOVEMBER 16, 1999
<TABLE>
<CAPTION>
Energy Financials Healthcare
Portfolio Portfolio Portfolio
----------- ----------- -----------
<S> <C> <C> <C>
Portfolio
Number of issues of common stock...... 22 40 22
Number of American Depository Receipts
and/or Shares........................ 1 0 2
Percentage of High Risk Securities
(as described in footnote 2 to
Portfolios).......................... 1.96% 31.55% 29.51%
Percentage of Speculative Securities
(as described in footnote 2 to
Portfolios).......................... 0% 0% 5.82%
Percentage of Venture Securities
(as described in footnote 2 to
Portfolios).......................... 0% 0% 4.77%
Initial Number of Units................. 1,000,000 1,000,000 1,000,000
Fractional Undivided Interest in Trust
Represented by Each Unit............... 1/1,000,000 1/1,000,000 1/1,000,000
Public Offering Price per 1,000 Units...
Aggregate Value of Securities in
Trust................................ $ 996,138 $ 992,352 $ 990,174
=========== =========== ===========
Divided by Number of Units of Trust
(times 1,000)........................ $ 996.14 $ 992.35 $ 990.17
Plus Initial Sales Charge of 1.50% of
Public Offering Price (1.523% of the
net amount invested in Securities)... $ 15.17 $ 15.11 $ 15.08
----------- ----------- -----------
Public Offering Price................. $ 1,011.31 $ 1,007.46 $ 1,005.25
Plus Estimated Organization Costs..... $ 2.79 $ 1.85 $ 1.86
Plus the amount in the Income and
Capital Accounts..................... $ 0 $ 0 $ 0
----------- ----------- -----------
Total................................. $ 1,014.10 $ 1,009.31 $ 1,007.11
=========== =========== ===========
Sponsor's Repurchase Price and
Redemption
Price per 1,000 Units (based on value
of underlying Securities).............. $ 998.93 $ 994.20 $ 992.03
Sponsor's Profit (Loss) on Deposit...... $ 6,244 $ 5,883 $ 3,425
</TABLE>
11
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
SUMMARY OF ESSENTIAL INFORMATION
AS OF NOVEMBER 16, 1999
<TABLE>
<CAPTION>
Technology &
REIT Telecommunications
Portfolio Portfolio
----------- ------------------
<S> <C> <C>
Portfolio
Number of issues of common stock............ 12 31
Number of American Depository Receipts
and/or Shares.............................. 0 0
Percentage of High Risk Securities (as
described in footnote 2 to Portfolios)..... 0% 29.07%
Percentage of Speculative Securities (as
described in footnote 2 to Portfolios)..... 0% 6.24%
Initial Number of Units....................... 1,000,000 1,000,000
Fractional Undivided Interest in Trust
Represented by Each Unit..................... 1/1,000,000 1/1,000,000
Public Offering Price per 1,000 Units.........
Aggregate Value of Securities in Trust...... $ 988,279 $ 997,431
=========== ===========
Divided by Number of Units of Trust (times
1,000)..................................... $ 988.28 $ 997.43
Plus Initial Sales Charge of 1.50% of Public
Offering Price (1.523% of the net amount
invested in Securities).................... $ 15.05 $ 15.19
----------- -----------
Public Offering Price....................... $ 1,003.33 $ 1,012.62
Plus Estimated Organization Costs........... $ 2.79 $ 1.43
Plus the amount in the Income and Capital
Accounts................................... $ 0 $ 0
----------- -----------
Total....................................... $ 1,006.12 $ 1,014.05
=========== ===========
Sponsor's Repurchase Price and Redemption
Price per 1,000 Units (based on value of
underlying Securities)....................... $ 991.07 $ 998.86
Sponsor's Profit (Loss) on Deposit............ $ (4,416) $ 10,467
</TABLE>
12
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee and Unitholders of Equity Focus Trusts--Sector Series,
1999-B:
We have audited the accompanying statements of financial condition, including
the portfolios, of Equity Focus Trusts--Sector Series, 1999-B, consisting of
the Energy Portfolio, the Financials Portfolio, the Healthcare Portfolio, the
REIT Portfolio and the Technology & Telecommunications Portfolio, as of
November 16, 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
November 16, 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 Equity Focus Trusts--Sector Series, 1999-B,
as of November 16, 1999, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
New York, New York
November 16, 1999
13
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
Statements of Financial Condition as of Initial Date of Deposit, November 16,
1999
<TABLE>
<CAPTION>
Energy Financials Healthcare
Portfolio Portfolio Portfolio
TRUST PROPERTY(1) ---------- ---------- ----------
<S> <C> <C> <C>
Investment in Securities:
Contracts to purchase Securities(2)........ $ 998,928 $ 994,202 $ 992,034
---------- ---------- ----------
Total...................................... $ 998,928 $ 994,202 $ 992,034
========== ========== ==========
LIABILITIES
Reimbursement to Sponsor for Organization
Costs(3)................................... 2,790 1,850 1,860
---------- ---------- ----------
INTEREST OF UNITHOLDERS
Units of fractional undivided interest
outstanding for each respective trust:
Cost to investors(4)........................ $1,014,100 $1,009,310 $1,007,110
Less: Gross underwriting commissions(5)..... 15,172 15,108 15,076
Less: Reimbursement to Sponsor for
Organization Costs(3) ..................... 2,790 1,850 1,860
---------- ---------- ----------
Net amount applicable to investors.......... 996,138 992,352 990,174
---------- ---------- ----------
Total....................................... $ 998,928 $ 994,202 $ 992,034
========== ========== ==========
</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 4 to the Portfolios. See also the columns
headed Market Value of Securities. An irrevocable letter of credit in the
amount of $10,500,000 has been deposited with the Trustee for the purchase
of Securities. The letter of credit was issued by Svenska Handelsbanken.
(3) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing the
Trusts. These costs have been estimated at $2.79 per 1,000 Units for the
Energy Portfolio, $1.85 per 1,000 Units for the Financials Portfolio, and
$1.86 per 1,000 Units for the Healthcare 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.
(4) Aggregate public offering price computed on the basis set forth under
Public Sale of Units--Public Offering Price.
(5) Assumes the initial sales charge at a rate of 1.50% of the Public Offering
Price (1.523% of the net amount invested in the Securities) computed on the
basis set forth under Public Sale of Units--Public Offering Price and
Underwriter's and Sponsor's Profits. A deferred sales charge in the amount
of $1.25 per 1,000 Units is payable by a Trust on behalf of the Holders out
of net asset value of that Trust on each monthly Deferred Sales Charge
Payment Date ($15.00 per year) until the Trust terminates. The aggregate
sales charge for a Holder holding Units over the entire expected life of a
Trust will equal 4.50% of the Public Offering Price (4.520% of the net
amount invested); although due to fluctuations in the Market Value of the
Securities, the total maximum sales charge may be more than 4.50% of the
Public Offering Price. The initial portion of the sales charge will be
reduced on a graduated basis for quantity purchases. (See Public Sale of
Units--Public Offering Price.)
14
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
Statements of Financial Condition as of Initial Date of Deposit, November 16,
1999
<TABLE>
<CAPTION>
Technology &
REIT Telecommunications
Portfolio Portfolio
TRUST PROPERTY(1) ---------- ------------------
<S> <C> <C>
Investment in Securities:
Contracts to purchase Securities(2)........... $ 991,069 $ 998,861
---------- ----------
Total.......................................... $ 991,069 $ 998,861
========== ==========
LIABILITIES
Reimbursement to Sponsor for Organization
Costs(3)...................................... 2,790 1,430
---------- ----------
INTEREST OF UNITHOLDERS
Units of fractional undivided interest
outstanding for each respective trust:
Cost to investors(4)........................... $1,006,120 $1,014,050
Less: Gross underwriting commissions(5)........ 15,051 15,189
Less: Reimbursement to Sponsor for Organization
Costs(3)...................................... 2,790 1,430
---------- ----------
Net amount applicable to investors............. 988,279 997,431
---------- ----------
Total.......................................... $ 991,069 $ 998,861
========== ==========
</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 4 to the Portfolios. See also the columns
headed Market Value of Securities. An irrevocable letter of credit in the
amount of $10,500,000 has been deposited with the Trustee for the purchase
of Securities. The letter of credit was issued by Svenska Handelsbanken.
(3) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing the
Trusts. These costs have been estimated at $2.79 per 1,000 Units for the
REIT Portfolio and $1.43 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.
(4) Aggregate public offering price computed on the basis set forth under
Public Sale of Units--Public Offering Price.
(5) Assumes the initial sales charge at a rate of 1.50% of the Public Offering
Price (1.523% of the net amount invested in the Securities) computed on the
basis set forth under Public Sale of Units--Public Offering Price and
Underwriter's and Sponsor's Profits. A deferred sales charge in the amount
of $1.25 per 1,000 Units is payable by a Trust on behalf of the Holders out
of net asset value of that Trust on each monthly Deferred Sales Charge
Payment Date ($15.00 per year) until the Trust terminates. The aggregate
sales charge for a Holder holding Units over the entire expected life of a
Trust will equal 4.50% of the Public Offering Price (4.520% of the net
amount invested); although due to fluctuations in the Market Value of the
Securities, the total maximum sales charge may be more than 4.50% of the
Public Offering Price. The initial portion of the sales charge will be
reduced on a graduated basis for quantity purchases. (See Public Sale of
Units--Public Offering Price.)
15
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
ENERGY PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, NOVEMBER 16, 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Investment Number Percent of Value of
Securities(1) Symbol Ranking(2) of Shares(3) Net Assets Securities(4)
------------- ------ ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Domestic Oils
-------------
Atlantic Richfield
Corp. # ARC 2-L 300 2.92% $ 29,175
Conoco Inc. "B' # COCB 2-L 1,100 3.08 30,731
Murphy Oil # MUR 2-L 400 2.26 22,600
Tosco Corp. # TOS 1-M 300 0.86 8,569
------
9.12%
------
International Oils
------------------
BP Amoco ADS BPA 1-L 2,000 12.22% 122,125
Chevron Corp. CHV 2-L 600 5.63 56,213
Exxon Corp. XON 1-L 1,500 11.88 118,688
Mobil Corp. # MOB 1-L 600 6.18 61,688
Royal Dutch Petroleum RD 2-L 900 5.75 57,431
Texaco Inc. TX 1-L 1,800 11.70 116,888
Total Fina "B' ADS TOT 1-L 1,800 12.30 122,850
------
65.66%
------
Oilfield Services &
Drilling
-------------------
Halliburton Co. HAL 1-L 1,400 5.96% 59,588
Nabors Industries # NBR 1-M 400 1.10 10,950
Noble Drilling Corp. *# NE 1-M 700 1.99 19,906
Schlumberger Ltd. SLB 1-L 900 5.99 59,850
Transocean Offshore Inc. RIG 1-M 300 0.92 9,150
------
15.96%
------
Others
------
Anadarko Petroleum # APC 1-M 600 1.97% 19,688
Coastal Corp. # CGP 1-M 300 1.19 11,944
Edison Int'l # EIX 1-M 400 1.12 11,175
El Paso Energy EPG 1-M 300 1.19 11,888
Union Pacific
Resources *# UPR 1-H 1,300 1.96 19,581
Williams Cos. # WMB 1-M 500 1.83 18,250
------
9.26%
------ --------
100.00% $998,928
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
16
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
FINANCIALS PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, NOVEMBER 16, 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Investment Number Percentage Value of
Securities(1) Symbol Ranking(2) of Shares(3) of Portfolio Securities(4)
------------- ------ ---------- ------------ ------------ -------------
Financial Services
------------------
<S> <C> <C> <C> <C> <C>
American Express Company
# AXP 1-M 350 5.62% $55,825
Capital One Financial
Corporation # COF 1-H 200 1.04 10,363
Federal Home Loan # FRE 1-M 600 3.35 33,338
Federal National Mtge. # FNM 1-M 800 5.87 58,300
Franklin Resources, Inc. BEN 1-M 400 1.36 13,475
Kansas City Southern In-
dustries KSU 1-H 200 1.07 10,600
MBIA Inc. # MBI 1-M 200 1.07 10,688
MBNA Corporation # KRB 1-M 600 1.69 16,838
-----
21.07%
-----
<CAPTION>
Insurance--Multi Line
---------------------
<S> <C> <C> <C> <C> <C>
American International
Group AIG 2-L 550 6.07% 60,363
-----
6.07%
-----
<CAPTION>
Insurance--Property
Casualty
-------------------
<S> <C> <C> <C> <C> <C>
Allstate Corp. # ALL 1-M 1,400 4.05% 40,250
XL Limited "A' XL 1-M 300 1.75 17,419
-----
5.80%
-----
<CAPTION>
Life Insurance
--------------
<S> <C> <C> <C> <C> <C>
AXA Financial Inc. # AXF 1-M 500 1.81% 18,000
Allmerica Financial
Corp. AFC 1-M 200 1.18 11,700
Lincoln National Corp. LNC 1-M 300 1.44 14,325
ReliaStar Financial Cor-
poration # RLR 1-M 200 0.97 9,663
UNUMProvident Corp. # UNM 1-H 300 1.07 10,631
-----
6.47%
-----
<CAPTION>
Investment Banker--
Broker
-------------------
<S> <C> <C> <C> <C> <C>
Lehman Brothers # LEH 2-H 100 0.84% 8,394
Merrill Lynch & Co. # MER 1-H 350 3.09 30,713
Morgan Stanley Dean Wit-
ter # MWD 2-H 200 2.56 25,450
Paine Webber Group # PWJ 2-H 200 0.88 8,738
-----
7.37%
-----
<CAPTION>
Money Center Banks
------------------
<S> <C> <C> <C> <C> <C>
Bank of America Corp. BAC 1-H 1,100 7.47% 74,250
Chase Manhattan Corp. # CMB 1-H 1,000 8.65 86,000
-----
16.12%
-----
</TABLE>
17
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
FINANCIALS PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, NOVEMBER 16, 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Investment Number Percentage Value of
Securities(1) Symbol Ranking(2) of Shares(3) of Portfolio Securities(4)
------------- ------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Personal Loans
--------------
Aon Corp. # AOC 1-M 200 0.80% $ 7,963
Marsh & McLennan Compa-
nies # MMC 1-L 400 3.29 32,750
Providian Financial Cor-
poration PVN 1-H 150 1.22 12,113
------
5.31%
------
Savings & Loans
---------------
Charter One Financial * COFI 1-M 800 1.98% 19,650
------
1.98%
------
Regional Banks
--------------
AmSouth Bancorp ASO 1-H 400 1.01% 10,025
Bank of New York # BK 1-M 1,200 5.35 53,175
Commerce Bancorp CBH 1-H 200 0.94 9,313
Fifth Third Bancorp *# FITB 1-L 200 1.51 14,988
First Tennessee National
*# FTN 1-M 700 2.54 25,244
Fleet Boston # FLT 1-H 400 1.71 17,050
Mellon Financial Corpo-
ration MEL 1-M 700 2.82 28,000
National City Corp. # NCC 2-M 500 1.45 14,438
North Fork Bancorpora-
tion, Inc. NFB 1-M 500 1.07 10,688
PNC Bank Corp. # PNC 2-M 200 1.23 12,200
TCF Financial Corp. TCB 1-M 300 0.91 9,019
SunTrust Banks STI 2-M 200 1.49 14,813
U.S. Bancorp USB 1-M 400 1.51 15,050
Wells Fargo # WFC 1-M 1,300 6.27 62,400
------
29.81%
------ --------
100.00% $994,202
------ ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
18
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
HEALTHCARE PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, NOVEMBER 16, 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Investment Number Percentage Value of
Securities(1) Symbol Ranking(2) of Shares(3) of Portfolio Securities(4)
------------- ------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Biotechnology and De-
vices
---------------------
Amgen Inc.* AMGN 1-H 900 8.26% $ 81,900
BioCryst Pharmaceuti-
cals*# BCRX V-1 800 2.04 20,200
Genentech Inc. # DNA 1-H 300 2.30 22,838
IDEC Pharmaceuticals* IDPH 1-S 300 3.72 36,919
MedImmune Inc.* MEDI 1-S 200 2.10 20,875
------
18.42%
------
Devices and Supplies
--------------------
Abbott Laboratories # ABT 1-L 500 1.91% 18,969
Baxter International BAX 1-M 150 1.02 10,144
Beckman Coulter BEC 1-H 200 1.03 10,238
Biomet, Inc.* BMET 1-M 300 1.11 10,950
Johnson & Johnson # JNJ 2-L 450 4.81 47,756
Medtronic, Inc. # MDT 1-M 800 3.11 30,800
Stryker Corp. SYK 2-H 300 1.89 18,750
------
14.88%
------
Emerging Pharmaceuticals
& Generics
- ------------------------
Barr Laboratories BRL 1-H 600 2.06% 20,400
ICN Pharmaceuticals ICN 1-H 800 2.11 20,950
Medicis Pharmaceutical # MRX 1-H 600 2.05 20,325
Sepracor Inc.* SEPR V-1 300 2.73 27,113
------
8.95%
------
Pharmaceuticals
---------------
American Home Products AHP 1-M 2,500 13.86% 137,500
Bristol-Myers Squibb BMY 1-M 1,300 10.17 100,913
Pharmacia and Upjohn PNU 2-M 1,600 9.77 96,900
Roche Holding Ltd.,
Sponsor ADR* ROHHY 2-H 400 4.89 48,500
Schering-Plough SGP 1-M 2,500 14.14 140,313
SmithKline Beecham ADS SBH 2-H 700 4.92 48,781
------
57.75%
------ --------
100.00% $992,034
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
19
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
REIT PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, NOVEMBER 16, 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Investment Number Percentage Value of
Securities(1) Symbol Ranking(2) of Shares(3) of Portfolio Securities(4)
------------- ------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Apartments
----------
Equity Residential Prop-
erties Trust # EQR 1-M 2,000 8.16% $ 80,875
Gables Residential
Trust # GBP 2-M 3,400 8.45 83,725
------
16.61%
------
Industrial
----------
AMB Property Corpora-
tion # AMB 1-M 4,000 8.30% 82,250
First Industrial Realty
Trust # FR 2-M 3,300 8.26 81,881
------
16.56%
------
Net Leasing
-----------
Commercial Net Leasing
Realty * # NNN 2-M 8,100 8.32% 82,519
Correctional Properties
Trust # CPV 1-M 6,100 8.35 82,731
Franchise Finance Corp.
of America * # FFA 1-M 3,800 8.39 83,125
Hospitality Properties
Trust # HPT 2-M 4,300 8.30 82,238
------
33.36%
------
Office
------
Duke-Weeks Realty * # DRE 1-M 4,300 8.38% 83,044
Equity Office Proper-
ties * # EOP 1-M 3,700 8.40 83,250
------
16.78%
------
Retail
------
Bradley Real Estate BTR 2-M 4,800 8.41% 83,400
Simon Property Group * SPG 1-M 3,500 8.28 82,031
------
16.69%
------ --------
100.00% $991,069
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
20
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
TECHNOLOGY & TELECOMMUNICATIONS PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, NOVEMBER 16, 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Investment Number Percentage Value of
Securities(1) Symbol Ranking(2) of Shares(3) of Portfolio Securities(4)
------------- ------ ---------- ------------ ------------- -------------
Broadcast Media
---------------
<S> <C> <C> <C> <C> <C>
DoubleClick Inc. *# DCLK 1-H 200 3.27% $32,713
Sprint Corp. (PCS Grp)*# PCS 1-H 200 1.76 17,550
Yahoo Inc. * YHOO 1-H 100 2.13 21,256
-----
7.16%
-----
Communication Equipment
Manufacturing
-----------------------
Lucent Technologies # LU 1-M 500 3.88% 38,719
Motorola, Inc. MOT 1-M 300 3.53 35,250
Nortel Networks NT 2-M 200 1.53 15,338
QUALCOMM Inc.* QCOM 1-H 100 3.64 36,325
-----
12.58%
-----
Data Processing--
Hardware
-----------------
EMC Corp. # EMC 1-M 500 4.12% 41,156
Int'l Business Machines
Corp. # IBM 1-M 450 4.26 42,525
Sun Microsystems * # SUNW 2-M 300 3.80 37,988
Unisys Corp. # UIS 1-H 900 2.35 23,456
-----
14.53%
-----
<CAPTION>
Data Processing--Office
Equipment
-----------------------
<S> <C> <C> <C> <C> <C>
Xerox Corp. # XRX 1-M 400 1.01% 10,125
-----
1.01%
-----
<CAPTION>
Data Processing--
Services
-----------------
<S> <C> <C> <C> <C> <C>
America Online AOL 1-H 300 4.78% 47,756
-----
4.78%
-----
<CAPTION>
Data Processing--
Software
-----------------
<S> <C> <C> <C> <C> <C>
BMC Software * BMCS 1-H 300 2.08% 20,719
Microsoft Corp. * MSFT 1-M 700 6.12 61,119
Oracle Corp. * ORCL 1-H 400 2.58 25,800
-----
10.78%
-----
</TABLE>
21
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, 1999-B
TECHNOLOGY & TELECOMMUNICATIONS PORTFOLIO
ON THE INITIAL DATE OF DEPOSIT, NOVEMBER 16, 1999
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Investment Number Percentage Value of
Securities(1) Symbol Ranking(2) of Shares(3) of Portfolio Securities(4)
------------- ------ ---------- ------------ ------------- -------------
Electronics--Instruments
- ------------------------
<S> <C> <C> <C> <C> <C>
Hewlett-Packard HWP 1-M 400 3.04% $ 30,400
------
3.04%
------
<CAPTION>
Electronics--
Semiconductors
--------------
<S> <C> <C> <C> <C> <C>
Applied Materials * AMAT 2-H 300 3.17% 31,650
Applied Micro Circuits * AMCC 1-H 400 3.31 33,100
Broadcom Corp. * BRCM 2-S 150 2.64 26,353
Intel Corp. * INTC 1-M 500 3.83 38,281
Texas Instruments # TXN 1-M 400 4.04 40,350
------
16.99%
------
<CAPTION>
Networking
----------
<S> <C> <C> <C> <C> <C>
Cisco Systems * CSCO 1-M 700 5.92% 59,150
------
5.92%
------
<CAPTION>
Telephone--Long Distance
- ------------------------
<S> <C> <C> <C> <C> <C>
Global Crossing Ltd. * # GBLX 1-S 800 3.60% 36,000
MCI WorldCom * # WCOM 1-M 750 6.76 67,500
Sprint Corp. (FON
Group) # FON 1-M 400 3.01 30,075
------
13.37%
------
<CAPTION>
Telephone--Other
----------------
<S> <C> <C> <C> <C> <C>
ALLTEL Corp. # AT 1-M 100 0.85% 8,475
Broadwing Inc. # BRW 1-M 700 1.96 19,600
GTE Corp. # GTE 1-M 250 1.90 18,938
------
4.71%
------
<CAPTION>
Telephone--RBOC's
-----------------
<S> <C> <C> <C> <C> <C>
Bell Atlantic Corp. BEL 1-M 400 2.59% 25,850
SBC Communications # SBC 1-M 500 2.54 25,344
------
5.13%
------ --------
100.00% $998,861
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
22
<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 November 16, 1999.
All contracts for domestic Securities are expected to be settled by the
initial settlement date for the purchase of Units.
(2) Salomon Smith Barney has assigned these rankings according to the following
system, which uses two codes: a letter for the level of risk (L,M,H,S or V)
and a number for performance expectation (1-5).
RISK assesses predictability of earnings/dividends and stock price
volatility:
L (Low Risk): highly predictable earnings/dividends, low price
volatility
M (Moderate Risk): moderately predictable earnings/dividends, moderate
price volatility
H (High Risk): low predictability of earnings/dividends, high price
volatility
S (Speculative): exceptionally low predictability of earnings/dividends,
highest risk of price volatility
V (Venture): risk and return consistent with venture capital, suitable
only for well-diversified portfolios
PERFORMANCE rankings indicate the expected total return (capital gain or
loss plus dividends) over the next 12-18 months, assuming an unchanged, or
"flat" market; performance expectations depend on the risk category assigned
to the stock, as shown in the following chart.
<TABLE>
<CAPTION>
Low Risk Moderate Risk High Risk Speculative
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1 (Buy) Over 15% Over 20% Over 25% Over 30%
2 (Outperform) 5% to 15% 5% to 20% 10% to 25% 10% to 30%
3 (Neutral) -5% to 5% -5% to 5% -10% to 10% -10% to 10%
4 (Underperform) -5% to -15% -5% to -15% -10% to -20% -10% to -20%
5 (Sell) -15% or worse -15% or worse -20% or worse -20% or worse
</TABLE>
These rankings represent current opinions of Salomon Smith Barney research
analysts and are, of course, subject to change; no assurance can be given
that the stocks will perform as expected. These rankings have not been
audited by KPMG LLP.
(3) Per 1,000,000 Units.
(4) Valuation of Securities by the Trustee was made using the market value per
share as of the Evaluation Time on November 16, 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.
23
<PAGE>
DESCRIPTION OF THE TRUSTS
Objectives of the Trusts
The objective of the Equity Focus Trusts--Sector Series, 1999-B, Energy
Portfolio (the "Energy Portfolio"), Financials Portfolio (the "Financials
Portfolio"), and REIT Portfolio (the "REIT Portfolio") is to provide investors
with the possibility of capital appreciation and current dividend income
through a convenient and cost-effective investment in fixed portfolios
consisting of shares of Securities selected by the Sponsor. The Sponsor has
selected for the Energy, Financials and REIT Portfolios stocks which it
considers to have the strong potential for capital appreciation and current
dividend income over a period of one year relative to risks and opportunities.
The objective of the Equity Focus Trusts--Sector Series, 1999-B, Healthcare
Portfolio (the "Healthcare 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 Portfolio and the Technology Portfolio stocks which it considers to
have strong potential for capital appreciation over a period of one year
relative to risks and opportunities. The payment of dividends is not a primary
objective of the Healthcare and Technology Portfolios. The Energy Portfolio,
the Financials Portfolio, the Healthcare Portfolio, the REIT Portfolio, and the
Technology Portfolio are collectively referred to herein as the "Trusts" or as
the "Portfolios."
Achievement of each Trust's objectives is dependent upon several factors
including the financial condition of the issuers of the Securities and any
appreciation of the Securities. Furthermore, because of various factors,
including without limitation, Trust sales charges and expenses, unequal
weightings of stocks, brokerage costs and any delays in purchasing securities
with cash deposited, investors in the Trusts may not realize as high a total
return as the theoretical performance of the underlying stocks in their
respective Portfolios.
Structure and Offering
This Series of Equity Focus Trusts--Sector Series consists of five 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
24
<PAGE>
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 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
Salomon Smith Barney's Equity Focus Trusts are each based on a specific
research investing theme or industry trend identified by analysts of Smith
Barney Inc., and Salomon Brothers Inc., both under the common control of
Salomon Smith Barney Holdings, Inc., based on an analysis of each company and
the industry group as a whole. Salomon Smith Barney's Research Department is
staffed by over 100 investment analysts, who currently follow equities issued
by more than 1,600 companies (both domestic and foreign) in 86 industry groups
or stock areas of the market. The Securities included in the Portfolios were
selected by the Sponsor as stocks deemed to have above-average appreciation
potential over the 12 months following the selection of a Portfolio. The
investment rankings by Salomon Smith Barney normally pertain to an outlook for
a 12-18 month period (see footnote 2 to the Portfolios). In selecting
Securities for each of the Trusts, the Sponsor has not expressed any belief as
to the potential of these Securities for capital appreciation over a period
longer than one year. There is, of course, no assurance that any of the
Securities in the Trust will appreciate in value, and indeed any or all of the
Securities may depreciate in value at any time in the future. See Risk Factors.
25
<PAGE>
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 Energy Composite, Standard &
Poor's Financials Index, Standard & Poor's REIT Index, Morgan Stanley REIT
Index, Standard & Poor's Health Care Composite and Standard & Poor's Technology
Index. As with other performance data, performance comparisons should not be
considered representative of a Trust's relative performance for any future
period. Advertising and sales literature for the Trusts may also include
excerpts from the Sponsor's research reports on one or more of the stocks in
the Trusts, including a brief description of its businesses and market sector,
and the basis on which the stock was selected.
All of the domestic Securities are publicly traded either on a stock exchange
or in the over-the-counter market. Most of the contracts to purchase Securities
deposited initially in each of the Trusts are expected to settle in three
business days, in the ordinary manner for such Securities. Any foreign
Securities are publicly traded on a variety of foreign stock exchanges.
Settlement of contracts for foreign Securities varies by country and may take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
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--Portfolio Supervision.)
26
<PAGE>
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. Income Distributions, if any, will be
automatically reinvested in additional Units of the appropriate Trust, subject
only to the remaining applicable Deferred Sales Charge deduction, unless a
Holder elects to receive his distributions in cash (see Reinvestment Plan).
Because dividends on the Securities are not received by the 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 that an
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.
The Trusts are not appropriate for investors requiring conservation of
capital or high current income. Securities representing approximately 1.96% of
the Energy Portfolio, 31.55% of the Financials Portfolio, 29.51% of the
Healthcare Portfolio and 29.07% of the Technology Portfolio have been ranked
High Risk by Salomon Smith Barney's Research Department, described as "low
predictability of earnings/dividends; high price volatility." Securities
representing 5.82% of the Healthcare Portfolio and 6.24% of the Technology
27
<PAGE>
Portfolio have been ranked Speculative by Salomon Smith Barney's Research
Department, described as "exceptionally low predictability of earnings/
dividends; highest risk of price volatility." In addition, Securities
representing 4.77% of the Healthcare Portfolio have been ranked Venture by
Salomon Smith Barney's Research Department, described as "risk and return
consistent with venture capital; suitable only for well-diversified
portfolios."
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.
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, and if, and in the amounts, declared by the
issuer's board of directors and have a right to participate in amounts
available for distribution by the issuer only after all other claims on the
issuer have been paid or provided for. By contrast, holders of preference
stocks have the right to receive dividends at a fixed rate when and as declared
by the issuer's board of directors, normally on a cumulative basis. 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
28
<PAGE>
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 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.
29
<PAGE>
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 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 -- Portfolio Supervision.
On the basis of the best information available to the Sponsor at the present
time, none of the Securities is subject to exchange control restrictions under
existing law which would materially interfere with payment to the Trusts of
dividends due on, or proceeds from sale of, the Securities either because the
particular jurisdictions have not adopted any currency regulations of this type
or because the issues qualify for an exemption, or the Trusts, as an
extraterritorial investor, has qualified its purchase of the Securities as
exempt by following applicable "validation" or similar regulatory or exemptive
procedures. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely affect
payments to the Trusts.
In addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of international
securities in the Portfolios and on the ability of the
30
<PAGE>
Trusts to satisfy their obligation to redeem Units tendered to the Trustee for
redemption (see Redemption).
Exchange Rate Fluctuation
In recent years, foreign exchange rates have fluctuated sharply. Income from
foreign equity securities held by the Trusts, including those underlying any
ADRs held by a Trust, would be payable in the currency of the country of their
issuance. However, the Trusts will compute their income in United States
dollars, and the computation of income will be made on the date of its receipt
by the Trusts at the foreign exchange rate in effect on that date. Therefore,
if the value of the foreign currency falls relative to the United States dollar
between receipt of the income and its conversion to United States dollars, the
risk of such decline will be borne by Holders. In addition, the cost of
converting such foreign currency to United States dollars would also reduce the
return to the Holder.
American Depositary Shares and Receipts
American Depositary Shares ("ADSs"), and receipts therefor ("ADRs"), are
issued by an American bank or trust company to evidence ownership of underlying
securities issued by a foreign corporation. These instruments may not
necessarily be denominated in the same currency as the securities into which
they may be converted. Generally, ADSs and ADRs are designed for use in the
United States securities markets. For purposes of this Prospectus the term ADR
generally includes ADSs.
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.
Energy Portfolio
The Energy Portfolio is particularly subject to risks that are inherent to
the utility industry, including:
. difficulty in obtaining an adequate return on invested capital
. difficulty in financing large construction programs during an
inflationary period
. restrictions on operations and increased cost and delays attributable to
environmental considerations and regulations
. difficulty in raising capital in adequate amounts on reasonable terms in
periods of high inflation and unsettled capital markets
. increased costs and reduced availability of certain types of fuel
31
<PAGE>
. occasional reduced availability and high costs of natural gas for resales
. the effects of energy conservation, and
. the effects of a national energy policy and lengthy delays and greatly
increased costs and other problems associated with the design,
construction, licensing, regulation and operation of nuclear facilities
for electric generation, including, among other considerations, the
problems associated with the use of radioactive materials and the
disposal of radioactive wastes.
There are substantial differences between the regulatory practices and policies
of various jurisdictions, and any given regulatory agency may periodically make
major shifts in policy. There is no assurance that regulatory authorities will
grant rate increases in the future or that such increases will be adequate to
permit the payment of dividends on common stocks. Additionally, existing and
possible future regulatory legislation may make it even more difficult for
these utilities to obtain adequate relief. Certain of the issuers of securities
held by the Energy Portfolio may own or operate nuclear generating facilities.
Governmental authorities may from time to time review existing policies, and
impose additional requirements governing the licensing, construction and
operation of nuclear power plants. Moreover, price disparities within selected
utility groups and discrepancies in relation to averages and indices have
occurred frequently for reasons not directly related to the general movements
or price trends of utility common stocks. Causes of these discrepancies include
changes in the overall demand for and supply of various securities (including
the potentially depressing effect of new stock offerings), and changes in
investment objectives, market expectations or cash requirements of other
purchasers and sellers of securities.
The Energy Portfolio may be considered to be concentrated in common stocks of
companies engaged in refining and marketing oil and related products. According
to the U.S. Department of Commerce, the factors which will most likely shape
the industry include:
. the price and availability of oil from the Middle East
. changes in United States environmental policies, and
. the continued decline in U.S. production of crude oil.
Possible effects of these factors may be increased U.S. and world dependence on
oil from the Organization of Petroleum Exporting Countries and highly uncertain
and potentially more volatile oil prices and a higher rate of growth for
natural gas production than for other fuels. Factors which the Sponsor believes
may increase the profitability of oil and petroleum operations include
increasing demand for oil and petroleum products as a result of the continued
increases in annual miles driven and the improvement in refinery operating
margins caused by increases in average domestic refinery utilization rates. The
existence of surplus crude oil production capacity and the willingness to
adjust production levels are the two principal requirements for stable crude
oil markets. Without excess capacity, supply disruptions in some countries
cannot be compensated for by others.
Financials Portfolio
The financial services and financial services-related industries will be
particularly affected by certain economic, competitive and regulatory
developments. The profitability of financial services companies as a group is
largely dependent upon the availability and cost of capital funds which in turn
may fluctuate significantly in response to changes in interest rates and
general economic conditions. Credit losses resulting from financial
difficulties of borrowers can negatively impact the sector. Rising interest
rates and inflation may negatively affect certain financial services companies
as the costs of lending money, attracting deposits and doing business rise.
Insurance companies may be subject to severe price competition. Financial
institutions are subject to regulation and supervision by
32
<PAGE>
governmental authorities and changes in governmental policies may impact the
way financial institutions conduct business. Such governmental regulation may
limit both the amounts and types of loans and other financial commitments they
can make, and the interest rates and fees they can charge. Also, if government
regulation which would further reduce the separation between commercial and
investment banking is ultimately enacted, financial services companies may be
significantly affected in terms of profitability and competition.
Healthcare Portfolio
Companies in the health care industry are, generally, subject to governmental
regulation and approval of their products and services, which could have a
significant effect on their price and availability. Furthermore, the types of
products or services produced or provided by these companies may quickly become
obsolete. The costs of providing health care services 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
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.
REIT Portfolio
General. Real estate investment trusts ("REITs") are financial vehicles that
seek to pool capital from a number of investors in order to participate
directly in real estate ownership or financing. REITs are usually managed by
separate advisory companies for a fee which is ordinarily based on a percentage
of the assets of the REIT in addition to reimbursement of operating expenses.
Since the REIT Portfolio will consist entirely of shares issued by REITs, an
investment in the REIT Portfolio will be subject to varying degrees of risk
generally incident to the ownership of real property (in addition to securities
market risks). The underlying value of the REIT Portfolio's Securities and the
REIT Portfolio's ability to make distributions to its Holders may be adversely
affected by adverse changes in national economic conditions, adverse changes in
local market conditions due to changes in general or local economic conditions
and neighborhood characteristics, increased competition from other properties,
obsolescence of property, changes in the availability, cost and terms of
mortgage funds, the impact of present or future environmental legislation and
compliance with environmental laws, the ongoing need for capital improvements,
particularly in older properties, changes in real estate tax rates and other
operating expenses, regulatory and economic impediments to raising rents,
adverse changes in governmental rules and fiscal policies, dependency on
management skills, civil unrest, acts of God, including earthquakes and other
natural disasters (which may result in uninsured losses), acts of war, adverse
changes in zoning laws, and other factors which are beyond the control of the
issuers of the REITs in the REIT Portfolio.
REITs have been compared to bond equivalents (paying to the REIT holders
their pro rata share of the REIT's annual taxable income). In general, the
value of bond equivalents changes as the general
33
<PAGE>
levels of interest rates fluctuate. When interest rates decline, the value of a
bond equivalent portfolio invested at higher yields can be expected to rise.
Conversely, when interest rates rise, the value of a bond equivalent portfolio
invested at lower yields can be expected to decline. Consequently, the value of
the REITs may at times be particularly sensitive to devaluation in the event of
rising interest rates. Equity REITs are less likely to be affected by interest
rate fluctuations than Mortgage REITs and the nature of the underlying assets
of an Equity REIT, i.e., investments in real property, may be considered more
tangible than that of a Mortgage REIT. Equity REITs are more likely to be
adversely affected by changes in the value of the underlying property it owns
than Mortgage REITs.
REITs may concentrate investments in specific geographic areas or in specific
property types, i.e., hotels, shopping malls, residential complexes, and office
buildings; the impact of economic conditions on REITs can also be expected to
vary with geographic location and property type. Variations in rental income
and space availability and vacancy rates in terms of supply and demand are
additional factors affecting real estate generally and REITs in particular. In
addition, investors should be aware that REITs may not be diversified and are
subject to the risks of financing projects. REITs are also subject to defaults
by borrowers, self-liquidation, the market's perception of the REIT industry
generally, and the possibility of failing to qualify for tax-free pass-through
of income under the Internal Revenue Code, and to maintain exemption from the
Investment Company Act of 1940. A default by a borrower or lessee may cause the
REIT to experience delays in enforcing its rights as mortgagee or lessor and to
incur significant costs related to protecting its investments.
Uninsured Losses. The issuer of REITs generally maintains comprehensive
insurance on presently owned and subsequently acquired real property assets,
including liability, fire and extended coverage. However, there are certain
types of losses, generally of a catastrophic nature, such as earthquakes and
floods, that may be uninsurable or not economically insurable, as to which the
REITs properties are at risk in their particular locales. The management of
REIT issuers use their discretion in determining amounts, coverage limits and
deductibility provisions of insurance, with a view to requiring appropriate
insurance on their investments at a reasonable cost and on suitable terms. This
may result in insurance coverage that in the event of a substantial loss would
not be sufficient to pay the full current market value or current replacement
cost of the lost investment. Inflation, changes in building codes and
ordinances, environmental considerations, and other factors also might make it
infeasible to use insurance proceeds to replace a facility after it has been
damaged or destroyed. Under such circumstances, the insurance proceeds received
by REITs might not be adequate to restore its economic position with respect to
such property.
Environmental Liability. Under various federal, state, and local
environmental laws, ordinances and regulations, a current or previous owner or
operator of real property may be liable for the costs of removal or remediation
of hazardous or toxic substances on, under or in such property. Such laws often
impose liability whether or not the owner or operator caused or knew of the
presence of such hazardous or toxic substances and whether or not the storage
of such substances was in violation of a tenant's lease. In addition, the
presence of hazardous or toxic substances, or the failure to remediate such
property properly, may adversely affect the owner's ability to borrow using
such real property as collateral. No assurance can be given that one or more of
the REITs in the REIT Portfolio may not be presently liable or potentially
liable for any such costs in connection with real estate assets they presently
own or subsequently acquire while such REITs are held in the REIT Portfolio.
Americans with Disabilities Act. Under the Americans with Disabilities Act of
1990 (the "ADA"), all public accommodations are required to meet certain
federal requirements related to physical access and use by disabled persons. In
the event that any of the REITs in the REIT Portfolio invest in or hold
mortgages on real estate properties subject to
34
<PAGE>
the ADA, a determination that any such properties are not in compliance with
the ADA could result in imposition of fines or an award of damages to private
litigants. If any of the REITs in the REIT Portfolio were required to make
modifications to comply with the ADA, the REIT's ability to make expected
distributions to the REIT Portfolio could be adversely affected, thus adversely
affecting the ability of the REIT Portfolio to make distributions to Holders.
Property Taxes. Real estate generally is subject to real property taxes. The
real property taxes on the properties underlying the REITs in the REIT
Portfolio may increase or decrease as property tax rates change and as the
properties are assessed or reassessed by taxing authorities.
Liquidity. Although the Securities in the REIT Portfolio, except for
Restricted Securities held by the REIT Portfolio, if any, themselves are listed
on a national securities exchange or NASDAQ National Market System and are
liquid, real estate investments, the primary holdings of each of the Securities
in the REIT Portfolio are relatively illiquid. Therefore, the ability of the
issuers of the Securities in the REIT Portfolio to vary their portfolios in
response to changes in economic and other conditions will be limited and,
hence, may adversely affect the value of the Units. There can be no assurance
that any issuer of a Security will be able to dispose of its underlying real
estate assets when it finds disposition advantageous or necessary or that the
sale price of any disposition will recoup or exceed the amount of its
investment.
The REIT Portfolio may purchase securities that are not registered
("Restricted Securities") under the Securities Act, but can be offered and sold
to "qualified institutional buyers" under Rule 144A under the Securities Act.
Since it is not possible to predict with assurance exactly how this market for
Restricted Securities sold and offered under Rule 144A will develop, the
Sponsor will carefully monitor the REIT Portfolio's investments in these
securities, focusing on such factors, among others, as valuation, liquidity and
availability of information. This investment could have the effect of
increasing the level of illiquidity in the REIT Portfolio to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these Restricted Securities.
Technology Portfolio
The Technology Portfolio's investments in securities of technology related
companies present certain risks that may not exist to the same degree in other
types of investments. Technology stocks, in general, tend to be relatively
volatile as compared to other types of investments. Any such volatility will be
reflected in the value of the Technology Portfolio's Units. The technology and
science areas may be subject to greater governmental regulation than many other
areas and changes in governmental policies and the need for regulatory
approvals may have a material adverse effect on these areas. Additionally,
companies in these areas may be subject to risks of developing technologies,
competitive pressures and other factors and are dependent upon consumer and
business acceptance as new technologies evolve. Competitive pressures may have
a significant effect on the financial condition of companies in the technology
sector. For example, if technology continues to advance at an accelerated rate,
and the number of companies and product offerings continues to expand, these
companies could become increasingly sensitive to short product cycles and
aggressive pricing. Further, companies in the technology industry spend heavily
on research and development and are subject to the risk that their products or
services may not prove commercially successful or may become obsolete quickly.
The Technology Portfolio may be susceptible to factors affecting the
communications industry. The communications industry is subject to governmental
regulation and the products and services of communications companies may be
subject to rapid obsolescence. These factors could affect the value of the
Technology Portfolio's Units. Telephone companies in the United States, for
example, are subject to both state and federal regulations affecting permitted
rates of returns and the kinds of services
35
<PAGE>
that may be offered. In addition, federal communications laws regarding the
cable television industry have recently been amended to eliminate government
regulation of cable television rates where competition is present and allow
rates to be dictated by market conditions. In the absence of competition,
however, rates shall be regulated by federal and state governments to protect
the interest of subscribers. Certain types of companies represented in the
Technology Portfolio may be engaged in fierce competition for a share of the
market of their products. As a result, competitive pressures are intense and
the stocks are subject to rapid price volatility.
While the Technology Portfolio may include securities of established
suppliers of traditional communication products and services, this Trust may
invest in smaller communications companies which may benefit from the
development of new products and services. These smaller companies may present
greater opportunities for capital appreciation, and may also involve greater
risk than large, established issuers. Such smaller companies may have limited
product lines, market or financial resources, and their securities may trade
less frequently and in more limited volume than the securities of larger, more
established companies. As a result, the prices of the securities of such
smaller companies may fluctuate to a greater degree than the prices of
securities of other issuers.
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 4.50% of the Public Offering Price (4.712% 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
4.50% of the Public Offering Price. The initial sales charge is computed by
deducting the deferred sales charge ($30.00 per 1,000 Units) from the aggregate
sales charge. The initial sales charge on the Initial Date of Deposit is 1.50%
of the Public Offering Price. The initial sales charge is deducted from the
purchase price of a Unit at the time of purchase and paid to the Sponsor. The
deferred sales charge is a monthly charge of $1.25 per 1,000 Units and is
accrued in 24 monthly installments commencing on December 1, 1999 and will be
charged to the Capital Account on the first day of each month thereafter
through November 1, 2001. If a Deferred Sales Charge Payment Date is not a
business day, the payment will be charged to the Trust on the next business
day. If a Holder's sale or redemption of Units settles before a Deferred Sales
Charge Payment Date, all future deductions of the Deferred Sales charge will be
waived. Units purchased pursuant to the Reinvestment Plan are subject only to
the remaining applicable deferred sales charge deduction (see Reinvestment
Plan).
Purchasers on November 17, 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 November 17, 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:
36
<PAGE>
<TABLE>
<CAPTION>
Initial Sales Charge
---------------------
Percent of Percent of Maximum Dollar
Offering Net Amount Amount Deferred
Number of Units* Price Invested Per 1,000 Units
- ---------------- ---------- ---------- ---------------
<S> <C> <C> <C>
Fewer than 50,000......................... 1.50% 1.523% $30.00
50,000 but less than 100,000.............. 1.25 1.266 30.00
100,000 but less than 250,000............. 1.00 1.010 30.00
250,000 but less than 1,000,000........... .50 .503 30.00
1,000,000 or more......................... 0 0 30.00
</TABLE>
- ------------
* The 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.
The above graduated sales charges will apply to all purchases in the
aggregate of one or more of Portfolios or any portfolios of Equity Focus
Trusts--Sector Series, 1998-B or 1999-A on any one day by the same purchaser of
Units in the amounts stated. Purchases of Units will not be aggregated with
purchases of units of any other series of Equity Focus Trusts. Units held in
the name of the spouse of the purchaser or in the name of a child of the
purchaser under 21 years of age are deemed to be registered in the name of the
purchaser for purposes of calculating the applicable sales charge. The
graduated sales charges are also applicable to a trustee or other fiduciary
purchasing securities for a single trust estate or single fiduciary account.
Valuation of Securities by the Trustee is made as of the close of business on
the New York Stock Exchange on each business day. Securities quoted on national
stock exchange or Nasdaq National Market are valued at the closing sale price,
or, if no closing sales price exists, at the mean between the closing bid and
offer prices. Securities not so quoted are valued at the mean between bid and
offer prices.
Employees of the Sponsor and its subsidiaries, affiliates and employee-
related accounts may purchase Units pursuant to employee benefit plans, at a
price equal to the aggregate value of the Securities in 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 1.50% of the Public Offering Price
(subject to reduction on a graduated scale basis in the case of volume
purchases, and subject to reduction for purchasers as described under Public
Offering Price above) and the monthly Deferred Sales Charge of $1.25 per 1,000
Units.
On the Initial Date of Deposit, the Sponsor also realized a profit or loss on
deposit of the Securities into each of the Trusts in the amount set forth under
Investment Summary, which equals the difference between the cost of the
Securities to a Trust (which is based on the aggregate value of the Securities
on the Date of Deposit) and the purchase price of such Securities to the
Sponsor. In the event that subsequent deposits are effected by the Sponsor with
the deposit of Securities (as opposed to cash or a letter of credit) with
respect to the sale of additional Units to the public, the Sponsor similarly
may realize a profit or loss. The Sponsor also may realize profits or sustain
losses as a result of fluctuations after the Initial Date of Deposit in the
aggregate value of the Securities and hence of the Public Offering Price
received by the Sponsor for Units. Cash, if any, made available by buyers of
Units to the Sponsor prior to the settlement dates for purchase of Units may be
used in the Sponsor's business and may be of benefit to the Sponsor.
37
<PAGE>
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.
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
38
<PAGE>
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 250,000 Units. Thus, a Holder will be able (except
during a period described in the last paragraph under this heading), not later
than the seventh calendar day following such tender (or if the seventh calendar
day is not a business day, on the first business day prior thereto), to receive
in kind an amount per Unit equal to the Redemption Price per Unit (computed as
described in Redemption--Computation of Redemption Price per Unit) as
determined as of the day of tender. The Redemption Price per Unit for in kind
distributions (the "In Kind Distribution") will take the form of the
distribution of whole and fractional shares of each of the Securities in the
amounts and the appropriate proportions represented by the fractional undivided
interest in a Trust of the Units tendered for redemption (based upon the
Redemption Price per Unit).
In Kind Distributions on redemption of a minimum of 250,000 Units will be
held by the Chase Manhattan Bank, as Distribution Agent, for the account, and
for disposition in accordance with the instructions of, the tendering Holder as
follows:
(a) If the tendering Holder requests cash payment, the Distribution Agent
shall sell the In Kind Distribution as of the close of business on the date
of tender and remit to the Holder not later than seven calendar days
thereafter the net proceeds of sale, after deducting brokerage commissions
and transfer taxes, if any, on the sale. The Distribution Agent may sell
the Securities through the Sponsor, and the Sponsor may charge brokerage
commissions on those sales. Since these proceeds will be net of brokerage
commissions, Holders who wish to receive cash for their Units should always
offer them for sale to the Sponsor in the secondary market before seeking
redemption by the Trustee. The Trustee may offer Units tendered for
redemption and cash liquidation to 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.
39
<PAGE>
A Holder may tender Units for redemption on any weekday (a "Tender Day")
which is not one of the following: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day (observed), Independence Day, Labor
Day, Thanksgiving or Christmas. The right of redemption may be suspended and
payment postponed for any period, determined by the Securities and Exchange
Commission ("SEC"), (1) during which the New York Stock Exchange, Inc. is
closed other than for customary weekend and holiday closings, (2) during which
the trading on that Exchange is restricted or an emergency exists as a result
of which disposal or evaluation of the Securities is not reasonably practicable
or (3) for such periods as the SEC may by order permit.
Computation of Redemption Price Per Unit
Redemption Price per Unit is computed by the Trustee as of the Evaluation
Time on each June 30 and December 31 (or the last business day prior thereto),
as of the Evaluation Time next following the tender of any Unit for redemption
on any Tender Day, and on any other business day desired by the Trustee or the
Sponsor, by adding (1) the aggregate value of the Securities determined by the
Trustee, (2) amounts in a Trust including dividends receivable on stocks
trading ex-dividend (with appropriate adjustments to reflect monthly
distributions made to Holders) and (3) all other assets in a Trust; deducting
therefrom the sum of (a) taxes or other governmental charges against 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 on the last reported sales prices as of the Evaluation Time on the
over-the-counter market by one or more reporting service (unless the Trustee
deems such mean inappropriate as a basis for evaluation) or, if no such prices
are available, (1) on the basis of the mean between current bid and offer
prices on the over-the-counter market, (2) on the basis of the mean between
current bid and offer prices for comparable securities, (3) 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 (4) 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
40
<PAGE>
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 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.
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.
41
<PAGE>
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 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. 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
42
<PAGE>
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 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,
43
<PAGE>
among other conditions, requirements that the Replacement Securities shall be
publicly-traded common stocks; shall be issued by an issuer subject to or
exempt from the reporting requirements under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (or similar provisions of law); shall not
result in more than 10% of a Trust consisting of securities of a single issuer
(or of two or more issuers which are Affiliated Persons as this term is defined
in the Investment Company Act of 1940) which are not registered and are not
being registered under the Securities Act of 1933 or result in a Trust owning
more than 50% of any single issue which has been registered under the
Securities Act of 1933; and shall have, in the opinion of the Sponsor,
characteristics sufficiently similar to the characteristics of the other
Securities in that Trust as to be acceptable for acquisition by such Trust.
Whenever a Replacement Security has been acquired for a Trust, the Trustee
shall, on the next Distribution Day that is more than 30 days thereafter, make
a pro rata distribution of the amount, if any, by which the cost to that Trust
of the Failed Security exceeded the cost of the Replacement Security. If
Replacement Securities are not acquired, the Sponsor will, on or before the
next following Distribution Day, cause to be refunded the attributable sales
charge, plus the attributable 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.
44
<PAGE>
Reports to Holders
The Trustee will furnish Holders with each distribution a statement of the
amount of income and the amount of other receipts, if any, which are being
distributed, expressed in each case as a dollar amount per Unit. Within a
reasonable period of time after the end of each calendar year, the Trustee will
furnish to each person who at any time during the calendar year was a Holder of
record a statement (1) as to the Income Account: income received; deductions
for applicable taxes and for fees and expenses of the Trustee and counsel, and
certain other expenses; amounts paid in connection with redemptions of Units
and the balance remaining after such distributions and deductions, expressed in
each case both as a total dollar amount and as a dollar amount per Unit
outstanding on the last business day of such calendar year; (2) as to the
Capital Account: the disposition of any Securities (other than pursuant to In
Kind Distributions) and the net proceeds received therefrom; the results of In
Kind Distributions in connection with redemption of Units; deductions for
payment of applicable taxes and for fees and expenses of the Trustee and
counsel and certain other expenses, to the extent that the Income Account is
insufficient, and the balance remaining after such distribution and deductions,
expressed both as a total dollar amount and as a dollar amount per Unit
outstanding on the last business day of such calendar year; (3) a list of the
Securities held and the number of Units outstanding on the last business day of
such calendar year; (4) the Redemption Price per Unit based upon the last
computation thereof made during such calendar year; and (5) amounts actually
distributed during such calendar year from the Income Account expressed both as
total dollar amounts and as dollar amounts per Unit outstanding on the record
dates for such distributions.
In order to enable them to comply with federal and state tax reporting
requirements, Holders will be furnished with evaluations of Securities upon
request to the Trustee.
Book-Entry Units
Ownership of Units of 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
45
<PAGE>
Indenture may also be amended in any respect by the Sponsor and the Trustee, or
any of the provisions thereof may be waived, with the consent of the Holders of
51% of the Units, provided that no such amendment or waiver will reduce the
interest in a Trust of any Holder without the consent of such Holder or reduce
the percentage of Units required to consent to any such amendment or waiver
without the consent of all Holders.
The Indenture will terminate upon the earlier of the disposition of the last
Security held thereunder or the Mandatory Termination Date specified under
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 Equity Focus Trusts--Sector Series (an "Exchange Series")
at their relative net asset values, subject only to the remaining deferred
sales charge (as disclosed in the prospectus for the Exchange Series). The
exchange option described above will also be available to investors in a Trust
who elect to purchase units of an Exchange Series within 60 days of their
liquidation of Units in a Trust.
Holders who retain their Units until the termination of a Trust may be able
to reinvest their terminating distributions into units of a subsequent series
of Equity Focus Trusts--Sector Series (the "New Series") provided one is
offered. Such purchaser may be entitled to a reduced sales load (as disclosed
in the prospectus for the New Series) upon the purchase of units of the New
Series.
Under the exchange and rollover privilege, the Sponsor's repurchase price
would be based upon the market value of the Securities in a Trust portfolio and
units in the Exchange Series or New Series will be sold to the Holder at a
price based on the aggregate market price of the securities in the portfolio of
the Exchange Series or New Series. 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
46
<PAGE>
Exchange or New Series is available and to obtain a prospectus. Holders may
acquire units of those Series which are lawfully for sale in states where they
reside and only those Exchange Series in which the Sponsor is maintaining a
secondary market. At any time prior to the exchange by the Holder of units of
an Exchange Series, or the purchase by a Holder of units of a New Series, such
Holder may change its investment strategy and receive its terminating
distribution. An election of either of these options will not prevent the
holder from recognizing taxable gain or loss (except in the case of loss, if
and to the extent the Exchange or New Series, as the case may be, is treated as
substantially identical to a Trust) as a result of the liquidation, even though
no cash will be distributed to pay any taxes. Holders should consult their own
tax advisers in this regard. The Sponsor reserves the right to modify, suspend
or terminate either or both of these reinvestment privileges at any time.
REINVESTMENT PLAN
Distributions of income and/or principal, if any, on Units will be reinvested
automatically in additional Units of a Trust, subject only to the remaining
applicable Deferred Sales Charge deduction, pursuant to a Trust's "Reinvestment
Plan." If the Holder does not wish to participate in the Reinvestment Plan and
wishes to receive cash distributions, the Holder must notify its financial
consultant at Salomon Smith Barney Inc., Robinson-Humphrey or the Trustee
(depending upon whether the Units are held in street name through Salomon Smith
Barney Inc., Robinson-Humphrey or directly in the name of the Holder,
respectively), at least ten business days prior to the Distribution Day to
which that election is to apply. The election may be modified or terminated by
similar notice.
Distributions being reinvested will be paid in cash to the Sponsor, who will
use them to purchase Units of that Trust at the Sponsor's Repurchase Price (the
net asset value per Unit without any sales charge) in effect at the close of
business on the Distribution Day. These may be either previously issued Units
repurchased by the Sponsor or newly issued Units created upon the deposit of
additional Securities in the Trust (see Description of the Trusts -- Structure
and Offering). Each participant will receive an account statement reflecting
any purchase or sale of Units under the Reinvestment Plan.
The costs of the Reinvestment Plan will be borne by the Sponsor, at no cost
to any of the Trusts. The Sponsor reserves the right to amend, modify or
terminate the Reinvestment Plan at any time without prior notice.
RESIGNATION, REMOVAL AND LIMITATIONS ON LIABILITY
Trustee
The Trustee or any successor may resign upon notice to the Sponsor. The
Trustee may be removed upon the direction of the Holders of 51% of the Units of
a trust at any time, or by the Sponsor without the consent of any of the
Holders if the Trustee becomes incapable of acting or becomes bankrupt or its
affairs are taken over by public authorities. Such resignation or removal shall
become effective upon the acceptance of appointment by the successor. In case
of such resignation or removal the Sponsor is to use its best efforts to
appoint a successor promptly and if upon resignation of the Trustee no
successor has accepted appointment within thirty days after notification, the
Trustee may apply to a court of competent jurisdiction for the appointment of a
successor. The Trustee shall 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
47
<PAGE>
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.
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).
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
48
<PAGE>
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 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
49
<PAGE>
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 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.
50
<PAGE>
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.
51
<PAGE>
EQUITY FOCUS
TRUSTS
----------------------------------------------
Sector Series, 1999-B
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. 333-89371 and the Investment Company Act of 1940 (file no. 811-3491), and
to which reference is hereby made. Copies may be reviewed at the Commission or
on the internet, or obtained from the Commission at prescribed rates by:
. calling: 1-800-SEC-0330
. visiting the SEC internet address: http://www.sec.gov.
. writing: Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549-6009
- --------------------------------------------------------------------------------
Index
<TABLE> Sponsor:
<S> <C> Salomon Smith Barney
Investment Summary 2 Inc. 388 Greenwich
Summary of Essential Information 10 Street 23rd Floor New
Independent Auditors' Report 13 York, New York 10013
Statements of Financial Condition 14 (212) 816-4000
Portfolios 16
Description of the Trusts 24 Trustee:
Risk Factors 27
Public Sale of Units 36 The Chase Manhattan Bank
Market for Units 38 4 New York Plaza New
Redemption 38 York, New York 10004
Expenses and Charges 40 (800) 354-6565
Administration of the Trusts 42
Exchange and Rollover Privileges 46
Reinvestment Plan 47
Resignation, Removal and Limitations
on Liability 47
Taxes 48
Miscellaneous 51
</TABLE>
- --------------------------------------------------------------------------------
SalomonSmithBarney
----------------------------
A member of citigroup [LOGO]
- --------------------------------------------------------------------------------
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 6605
