<PAGE>
Pursuant to Rule 497(b)
Registration No: 333-51746
EQUITY FOCUS TRUSTS
------------------------------------------------
Sector Series, Emerging Sector Portfolios
Broadband Technologies 2001A
Wireless Technologies 2001A
A Unit Investment Trust
SalomonSmithBarney The Equity Focus Trusts--Sector Series, Emerging
--------------------------- Sector Portfolio consists of two separate unit
A member of citigroup[LOGO] investment trusts designated as Broadband
Technologies 2001A and Wireless Technologies
2001A. 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 emerging industry 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 January 9, 2001
Read and retain this Prospectus for future reference
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
BROADBAND TECHNOLOGIES 2001A
WIRELESS TECHNOLOGIES 2001A
INVESTMENT SUMMARY
--------------------------------------------------------------------------------
Use this Investment Summary to help you decide whether one or both of the
portfolios comprising the Equity Focus Trusts--Sector Series, Emerging Sector
Portfolios is right for you. More detailed information can be found later in
this prospectus.
Investment Objectives
The Broadband Portfolio and the Wireless Portfolio, which are diversified among
sub-industry groups of the wireless communications sector, are designed for the
aggressive growth investor with a high tolerance for risk. 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 20-40 stocks,
designed to remain fixed over its one-year life. Unlike a mutual fund, the
portfolios are not managed; however, a security can be sold under some adverse
circumstances.
Investment Concept and Selection Process
Through the Trusts, investors can target a specific emerging industry in the
stock market with a portfolio of stocks recommended by Salomon Smith Barney
research analysts. This series includes two portfolios, one for each of the
Broadband and Wireless Technologies market sectors.
For the most part, our analysts identify the stocks ranked "1" or "2" on
Salomon Smith Barney's Investment Ranking System that fall into these
categories.
Our research analysts also 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 emerging 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. 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. The Trusts are each
concentrated in stocks which have been ranked High Risk by Salomon Smith Barney
and therefore may have a high degree of price volatility over the life of each
Trust. The value of units of each Trust will fluctuate with the value of the
underlying securities and the Trusts are not appropriate for investors
requiring high current income or conservation of capital.
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.
2
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
BROADBAND TECHNOLOGIES 2001A
WIRELESS TECHNOLOGIES 2001A
INVESTMENT SUMMARY
--------------------------------------------------------------------------------
. 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:
. Highly competitive pressures on rates that can be charged and pricing.
. Heavy proportionate spending on research and development.
. 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.
. Changing domestic and international demand for a particular product
(i.e. technology products and services).
Due to the "buy and hold" strategy of a unit investment trust, 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.
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 last reported sales prices of the
underlying securities in the portfolio. The public offering price will change
daily because prices of the underlying stocks will fluctuate.
The public offering price per unit will be calculated by:
. Adding the combined market value of the underlying stocks to any cash
held to purchase securities.
. Dividing that sum by the number of units outstanding.
. Adding an initial sales charge.
In addition, during the initial public offering, a per unit amount sufficient
to reimburse the Sponsor for organization costs is added to the Public Offering
Price. 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.
3
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
BROADBAND TECHNOLOGIES 2001A
WIRELESS TECHNOLOGIES 2001A
INVESTMENT SUMMARY
--------------------------------------------------------------------------------
Exchange or Rollover Option
During the life of a Trust, you may exchange units of one portfolio for units
of the other portfolio. When a Trust is about to terminate, you may have the
option to rollover your proceeds into a future portfolio, if one 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. You will pay
your share of expenses associated with an exchange, rollover or termination,
including brokerage commissions on the sale of securities.
Taxation
In general, dividends of the Trust will be taxed as ordinary income, whether
received in cash or reinvested in additional units. If you are a foreign
investor, you should be aware that distributions from the Trust will generally
be subject to information reporting and withholding taxes, including any income
from the Trust that is reinvested in additional units.
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,
notwithstanding reinvestment, may be subject to federal, state and local income
tax.
If you are taxed as an individual and have held your units (and the Trust has
held the securities) for more than 12 months, you may be entitled to a 20%
maximum federal income tax rate on gains, if any, from the sale of your units.
4
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
FEE TABLE FOR BROADBAND 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>
Initial Sales Charge Imposed on Purchase (as
a percentage of offering price)............ 1.00%* $10.00
Maximum Deferred Sales Charge............... 1.50%** $15.00
Creation and Development Fee................ .25%*** $ 2.50
----- ------
Total Sales Charge (including Creation and
Development Fee).......................... 2.75% $27.50
===== ======
Reimbursement to Sponsor for Estimated Or-
ganization Costs........................... .344% $ 3.44
===== ======
Estimated Cost of Liquidating Securities to
Meet Redemptions........................... .089% $ 0.89
===== ======
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% $ 0.88
Maximum Portfolio Supervision, Bookkeeping
and Administrative Fees.................... .026% $ 0.25
Other Operating Expenses.................... .028% $ 0.27
----- ------
Total...................................... .144% $ 1.40
===== ======
</TABLE>
<TABLE>
<S> <C>
Example
<CAPTION>
Cumulative Expenses
and Charges Paid
for Period:
-------------------
1 year
------
<S> <C>
An investor would pay the following expenses and charges on
a $10,000 investment, assuming the Trust's estimated
operating expense ratio of .144% and a 5% annual return on
the investment throughout the periods..................... $334
</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 may be above or below 1.00% but in no event will
exceed the combined initial sales charge and deferred sales charge of
2.50% of your initial investment. See Public Sale of Units--Public
Offering Price for further detail on how the sales charges are calculated.
** The actual fee is $2.50 per month per 1,000 Units, irrespective of the
purchase or redemption price, paid on each of the six Deferred Sales
Charge Payment Dates. If the Unit price exceeds $1.00 per Unit, the
deferred sales charge will be less than 1.50%; if the Unit price is less
than $1.00 per Unit, the deferred sales charge will exceed 1.50%.
*** The Creation and Development Fee compensates the Sponsor for the creation
and development of the Trust and has been historically included in the
sales charge. The actual fee is $2.50 per 1,000 Units paid as of the close
of the initial public offering period, which is expected to be 90 days
from the Initial Date of Deposit. If the Unit price exceeds $1.00 per
Unit, the Creation and Development Fee will be less than .25%; if the Unit
price is less than $1.00 per Unit, the Creation and Development Fee will
exceed .25%.
5
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
FEE TABLE FOR WIRELESS 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>
Initial Sales Charge Imposed on Purchase (as
a percentage of offering price)............ 1.00%* $10.00
Maximum Deferred Sales Charge............... 1.50%** $15.00
Creation and Development Fee................ .25%*** $ 2.50
---- ------
Total Sales Charge (including Creation and
Development Fee).......................... 2.75% $27.50
==== ======
Reimbursement to Sponsor for Estimated Or-
ganization Costs........................... .345% $ 3.44
==== ======
Estimated Cost of Liquidating Securities to
Meet Redemptions........................... .125% $ 1.25
==== ======
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% $ 0.88
Maximum Portfolio Supervision, Bookkeeping
and Administrative Fees.................... .026% $ 0.25
Other Operating Expenses.................... .028% $ 0.27
---- ------
Total...................................... .144% $ 1.40
==== ======
Example
<CAPTION>
Cumulative Expenses
and Charges Paid for
Period:
---------------------
1 year
------
<S> <C> <C>
An investor would pay the following expenses
and charges on a $10,000 investment,
assuming the Trust's estimated operating
expense ratio of .144% and a 5% annual
return on the investment throughout the
periods..................................... $337
</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 may be above or below 1.00% but in no event will
exceed the combined initial sales charge and deferred sales charge of
2.50% of your initial investment. See Public Sale of Units--Public
Offering Price for further detail on how the sales charges are calculated.
** The actual fee is $2.50 per month per 1,000 Units, irrespective of the
purchase or redemption price, paid on each of the six Deferred Sales
Charge Payment Dates. If the Unit price exceeds $1.00 per Unit, the
deferred sales charge will be less than 1.50%; if the Unit price is less
than $1.00 per Unit, the deferred sales charge will exceed 1.50%.
*** The Creation and Development Fee compensates the Sponsor for the creation
and development of the Trust and has been historically included in the
sales charge. The actual fee is $2.50 per 1,000 Units paid as of the close
of the initial public offering period, which is expected to be 90 days
from the Initial Date of Deposit. If the Unit price exceeds $1.00 per
Unit, the Creation and Development Fee will be less than .25%; if the Unit
price is less than $1.00 per Unit, the Creation and Development Fee will
exceed .25%.
6
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
BROADBAND TECHNOLOGIES 2001A
WIRELESS TECHNOLOGIES 2001A
SUMMARY OF ESSENTIAL INFORMATION
AS OF JANUARY 8, 2001+
Sponsor
Salomon Smith Barney Inc.
Trustee and Distribution Agent
The Bank of New York
Deferred Sales Charge Payment Dates
The first day of each month commencing September 1, 2001 through February 1,
2002
Sales Charge
The maximum sales charge (not including the Creation and Development Fee) is
2.50% of the Public Offering Price and consists of an initial sales charge
and a deferred sales charge. The initial sales charge is computed by
deducting the total deferred sales charge of $15.00 per 1,000 units from this
maximum sales charge of 2.50%. On the Initial Date of Deposit the initial
sales charge is 1.00% of the Public Offering Price. The initial sales charge
is paid directly from the amount invested. The deferred sales charge is paid
through a reduction of the net asset value of a Trust by $2.50 per 1,000
units on six Deferred Sales Charge Payment Dates. Upon a repurchase,
redemption or exchange of units before the final Deferred Sales Charge
Payment Date, any remaining deferred sales charge payments will be deducted
from the proceeds.
Mandatory Termination Date
February 22, 2002, or at any earlier time by the Sponsor with the consent of
Holders of 51% of the Units then outstanding.
Rollover Notification Date
January 16, 2002 or another date as determined by the Sponsor.
Distributions
Distributions of income, if any, will be made on the Distribution Day to
Holders of record on the corresponding Record Day. 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 10, 2001.
Distribution Day
November 25, 2001 and upon termination and liquidation of a Trust.
Evaluation Time
4:00 P.M. Eastern 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
$.88 per 1,000 Units.
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.
7
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
BROADBAND TECHNOLOGIES 2001A
WIRELESS TECHNOLOGIES 2001A
SUMMARY OF ESSENTIAL INFORMATION
AS OF JANUARY 8, 2001
<TABLE>
<CAPTION>
Broadband Wireless
Portfolio Portfolio
----------- -----------
<S> <C> <C>
Portfolio
Number of issues of common stock................... 21 22
Number of American Depository Receipts and/or
Shares............................................ 2 8
Percentage of High Risk Securities (as described in
footnote 2 to Portfolios)......................... 59.24% 53.61%
Percentage of Speculative Securities (as described
in footnote 2 to Portfolios)...................... 18.45% 8.46%
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 (net of
estimated organization costs)..................... $ 990,784 $ 988,463
=========== ===========
Divided by Number of Units of Trust (times 1,000).. $ 990.78 $ 988.46
Plus Initial Sales Charge of 1.00% of Public
Offering Price (1.010% of the net amount invested
in Securities).................................... $ 10.01 $ 9.98
----------- -----------
Public Offering Price.............................. $ 1,000.79 $ 998.44
Plus Estimated Organization Costs.................. $ 3.44 $ 3.44
Plus the amount in the Income and Capital Accounts. $ 0 $ 0
----------- -----------
Total.............................................. $ 1,004.23 $ 1,001.88
=========== ===========
Sponsor's Repurchase Price and Redemption Price per
1,000 Units (based on value of underlying
Securities)......................................... $ 979.22 $ 976.90
Sponsor's Profit on Deposit.......................... $ 55,836 $ 21,024
</TABLE>
8
<PAGE>
The Equity Focus Trusts: Sector Series
Emerging Sector Portfolios:
Broadband Technologies 2001A
Wireless Technologies 2001A
Investors Guide
The Emerging Sector Portfolios ("ESP"): For a Portfolio Approach to Investing
The Emerging Sector Portfolios are designed to invest in industry groups with
"cutting edge" technologies. These one-year unit trusts will hold sector-
specific portfolio of stocks identified by Salomon Smith Barney's Equity
Strategists. For the most part, the selections will include stocks ranked "1"
or "2" on Salomon Smith Barney's Investment Rating System (as outlined in the
prospectus). This offering of the Emerging Sector Portfolios will include
Broadband Technologies 2001A and Wireless Technologies 2001A, as summarized
below.
Broadband Technologies 2001A and Wireless Technologies 2001A
The roots of the Internet date back to the 1970's, when it was originally
developed for the military. In the 1980's, it expanded beyond the government to
include broad applications in academic and commercial research. And over the
past decade, the Internet has evolved into an integral part of how we access
information, conduct business and stay in touch. At the same time, "online"
traffic is exploding and is creating a rising demand for transmission capacity,
or bandwidth. To address this demand, the evolution of broadband access is
beginning to take shape through technologies like the evolution of fiber optic
networks and new ways to get online-such as cable, Digital Subscriber Lines
(DSL) and wireless connections.
The Emerging Sector Portfolios is designed to target a number of industry
groups that could benefit as the technologies described above evolve.
Broadband Technologies 2001A
. Carriers building "next-generation," high-speed national backbone
networks
. DSL and Cable Modem Equipment Providers
. Telecom Service Providers
. Infrastructure Providers
. Web Hosting Providers
Wireless Technologies 2001A
. Handset Providers
. Telecom Service Providers
. Infrastructure Providers
. Wireless Tower Providers
i
<PAGE>
. Telecommunications Chip Manufacturers
. Internet Content Sites
Key Investing Features
Professional Research Expertise: The portfolio is selected by Salomon Smith
Barney's equity strategists from a broad universe of stocks in the broadband
and wireless technology industries.
A Portfolio Approach to Investing: Diversifying a portfolio among 20-40 stocks
can mitigate the risks of investing in a single company.
Low Minimum Investment: All you need is $250 to get started.
Annual Rollover Feature: Each portfolio has a life of approximately one year.
As it matures, you may have the opportunity to reinvest proceeds into a new
series, if available, with a new list of stocks.
Daily Liquidity: Units can be sold at a price based on net asset value less any
remaining deferred sales charge. This price may be more or less than the amount
invested.
Sales Charges and Expenses
First-time investors pay an initial up front sales charge of about 1.00%. In
addition, all investors pay a deferred sales charge of $15.00 per 1,000 units
purchased.
Tax Reporting
Generally, an investor will be subject to Federal income tax on any dividends
and any net capital gains, whether or not the investor chooses to reinvest
dividends in additional units. Capital gains, if any, on assets held over a
year will be taxed up to the maximum federal tax rate of 20% for individuals
rather than the regular maximum tax rate of 39.6%. Please consult your tax
advisor concerning state and local taxation.
ii
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Sponsor, Trustee and Unitholders of Equity Focus Trusts--Sector Series,
Emerging Sector Portfolios: Broadband Technologies 2001A and Wireless
Technologies 2001A:
We have audited the accompanying statements of financial condition, including
the portfolios, of Equity Focus Trusts--Sector Series, Emerging Sector
Portfolios: Broadband Technologies 2001A and Wireless Technologies 2001A, as of
January 8, 2001. 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 auditing standards generally
accepted in the United States of America. 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 January 8, 2001, 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, Emerging
Sector Portfolios: Broadband Technologies 2001A and Wireless Technologies
2001A, as of January 8, 2001, in conformity with accounting principles
generally accepted in the United States of America.
/s/ KPMG LLP
New York, New York
January 8, 2001
9
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
BROADBAND TECHNOLOGIES 2001A
WIRELESS TECHNOLOGIES 2001A
Statements of Financial Condition as of Initial Date of Deposit, January 8,
2001
<TABLE>
<CAPTION>
Broadband Wireless
Portfolio Portfolio
TRUST PROPERTY(1) --------- ---------
<S> <C> <C>
Investment in Securities:
Contracts to purchase Securities(2)..................... $ 994,224 $ 991,903
--------- ---------
Total.................................................... $ 994,224 $ 991,903
========= =========
LIABILITIES
Reimbursement to Sponsor for Organization Costs(3)....... $ 3,440 $ 3,440
Deferred Sales Charge(4)................................. 15,000 15,000
--------- ---------
18,440 18,440
--------- ---------
INTEREST OF UNITHOLDERS
Units of fractional undivided interest outstanding for
each respective trust:
Cost to investors(5)..................................... 1,004,230 1,001,880
Less: Gross underwriting commissions(6).................. 25,006 24,977
Less: Reimbursement to Sponsor for Organization Costs(3). 3,440 3,440
--------- ---------
Net amount applicable to investors(7).................... 975,784 973,463
--------- ---------
Total.................................................... $ 994,224 $ 991,903
========= =========
</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 $4,000,000 has been deposited with the Trustee for the purchase
of Securities. The letter of credit was issued by Svenska Handelsbanken.
(3) A portion of the Public Offering Price consists of an amount sufficient to
reimburse the Sponsor for all or a portion of the costs of establishing the
Trusts. These costs have been estimated at $.344 per 1,000 Units for the
Broadband Portfolio and $.344 for the Wireless 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) A deferred sales charge of $15.00 per 1,000 Units is payable in six monthly
payments of $2.50 per 1,000 Units. Distributions will be made to an account
maintained by the Trustee from which the deferred sales charge obligation
of the investors to the Sponsor will be satisfied. If Units are redeemed
prior to February 1, 2002 the remaining portion of the deferred sales
charge applicable to such Units will be transferred to such account on the
redemption date.
(5) Aggregate public offering price computed on the basis set forth under
Public Sale of Units--Public Offering Price.
(6) Assumes a maximum aggregate sales charge of 2.50% of the Public Offering
Price (2.564% of the net amount invested), although due to fluctuations in
the value of the Securities, the total maximum sales charge may be more
than 2.50% of the Public Offering Price.
(7) A Creation and Development Fee in the amount of $2.50 per 1,000 Units is
payable by each Trust on behalf of the Holders out of the net asset value
of such Trust as of the close of the initial offering period. This Creation
and Development Fee may be more than .25% of the Public Offering Price due
to fluctuations in the value of the Securities. If Units are redeemed prior
to the close of the initial public offering period, the Creation and
Development Fee will not be deducted from the proceeds.
10
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
BROADBAND TECHNOLOGIES 2001A
ON THE INITIAL DATE OF DEPOSIT, JANUARY 8, 2001
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market
Stock Investment Number Percentage Value of
Securities(1) Symbol Ranking(2) of Shares(3) of Portfolio Securities(4)
------------- ------ ---------- ------------ ------------ -------------
Communication Equipment
Manufacturers
-----------------------
<S> <C> <C> <C> <C> <C>
CIENA Corp.*# CIEN 1-H 400 3.01% $ 29,950
Cisco Systems*# CSCO 1-H 2,000 7.35 73,094
Ericsson (LM) Tel 'B'
ADS* ERICY 2-M 3,900 4.46 44,363
Juniper Networks*# JNPR 1-S 450 5.23 51,968
Motorola, Inc.# MOT 2-M 1,400 3.06 30,450
Nokia Corp. ADS NOK 2-M 700 3.04 30,188
Nortel Networks NT 1-H 2,100 6.89 68,513
QUALCOMM Inc.*# QCOM 1-H 800 6.27 62,300
Sycamore Networks*# SCMR 1-H 1,400 5.12 50,925
------
44.43%
------
<CAPTION>
Components
----------
<S> <C> <C> <C> <C> <C>
Corning Inc.# GLW 1-H 950 5.05% 50,172
JDS Uniphase Corp.*# JDSU 1-S 1,400 6.37 63,350
------
11.42%
------
<CAPTION>
Data Processing--
Hardware
-----------------
<S> <C> <C> <C> <C> <C>
Brocade Communications
Sys*# BRCD 1-H 500 3.92% 39,000
EMC Corp.# EMC 1-M 1,100 6.81 67,650
------
10.73%
------
<CAPTION>
Data Processing--
Services
-----------------
<S> <C> <C> <C> <C> <C>
America Online# AOL 1-H 1,700 6.84% 68,051
------
6.84%
------
<CAPTION>
Data Processing--
Software
-----------------
<S> <C> <C> <C> <C> <C>
VERITAS Software*# VRTS 1-H 500 3.89% 38,656
------
3.89%
------
<CAPTION>
Electronic--
Semiconductor
-------------
<S> <C> <C> <C> <C> <C>
Applied Micro Circuits*# AMCC 1-H 900 5.81% 57,713
Broadcom Corp. 'A'*# BRCM 1-S 300 2.82 28,031
PMC-Sierra Inc.*# PMCS 1-H 700 5.09 50,619
------
13.72%
------
<CAPTION>
Telephone--Long Distance
------------------------
<S> <C> <C> <C> <C> <C>
Global Crossing Ltd.*# GX 1-S 1,000 1.96% 19,500
Level 3 Communications*# LVLT 1-S 600 2.07 20,625
WorldCom Inc.*# WCOM 1-M 2,700 4.94 49,106
------
8.97%
------ --------
100.00% $994,224
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
11
<PAGE>
EQUITY FOCUS TRUSTS--SECTOR SERIES, EMERGING SECTOR PORTFOLIOS
WIRELESS TECHNOLOGIES 2001A
ON THE INITIAL DATE OF DEPOSIT, JANUARY 8, 2001
-----------------------------------------------------------------------------
<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>
Domestic Wireless Serv-
ices
-----------------------
Metricom Inc.*# MCOM 1-S 1,400 1.51% $ 14,963
Sprint Corp. (PCS Grp)# PCS 1-H 3,300 8.13 80,644
Voicestream Wireless
Corp.* VSTR 2-S 250 2.91 28,906
WinStar Communications*# WCII 1-S 2,400 4.04 40,050
WorldCom Inc.*# WCOM 1-M 2,700 4.95 49,106
------
21.54%
------
International Wireless
Services
----------------------
Cable & Wireless ADS# CWP 1-H 450 2.00% 19,884
Nippon Tel & Tel ADS# NTT 1-L 900 3.11 30,881
Telefonica S.A. ADS# TEF 2-M 500 2.73 27,063
Telefonos De Mexico ADR TMX 1-H 550 2.71 26,847
Vodaphone Group ADR VOD 2-H 900 3.11 30,825
------
13.66%
------
Wireless CEM's (Contract
Electronic Manufactur-
ers)
------------------------
Flextronics Int'l.*# FLEX 1-H 3,000 8.07% 80,063
Sanmina Corp.*# SANM 1-H 500 3.83 37,969
------
11.90%
------
Wireless Components
-------------------
Analog Devices ADI 1-H 450 2.09% 20,700
Intel Corp.* INTC 2-M 600 1.93 19,163
Texas Instruments TXN 2-M 400 1.90 18,800
------
5.92%
------
Wireless Equipment
------------------
Alcatel ADS ALA 1-M 550 3.30% 32,794
Ericsson (LM) Tel 'B'
ADS* ERICY 2-M 8,700 9.98 98,963
Motorola, Inc. MOT 2-M 1,400 3.07 30,450
Nokia Corp. ADS NOK 2-M 1,600 6.96 69,000
Nortel Networks NT 1-H 3,000 9.87 97,875
Philips Electronics NV*# PHG 1-H 900 3.60 35,719
QUALCOMM Inc.* QCOM 1-H 1,300 10.20 101,238
------
46.98%
------ --------
100.00% $991,903
====== ========
</TABLE>
The Notes following the Portfolios are an integral part of each Portfolio of
Securities.
12
<PAGE>
Notes to Portfolios of Securities
(1) All Securities are represented entirely by contracts to purchase
Securities, which were entered into by the Sponsor on January 8, 2001. 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 January 8, 2001. 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 last reported sale prices, or if no price
exists, at the mean between the last reported 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 its parent, 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
parent, subsidiaries, affiliates and/or predecessor firms, has acted as
manager (co-manager) of a public offering of the securities of this company
or an affiliate.
13
<PAGE>
DESCRIPTION OF THE TRUSTS
Objectives of the Trusts
The objective of the Equity Focus Trusts--Sector Series, Emerging Sector
Portfolios: Broadband Technologies 2001A (the "Broadband Portfolio") and
Wireless Technologies 2001A Portfolio (the "Wireless 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
Securities selected by the Sponsor. The Sponsor has selected for the Broadband
Portfolio and the Wireless 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
Broadband and Wireless Portfolios. The Broadband Portfolio and the Wireless
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, Emerging Sector Portfolios
consists of two 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, as set forth under the Summary of
Essential Information, in the Securities listed under the respective Trust's
Portfolio. Additional Units of a Trust will be issued in the amount required to
satisfy purchase orders by depositing in such Trust cash (or a bank letter of
credit in lieu of cash) with instructions to purchase Securities, contracts to
purchase Securities together with irrevocable letters of credit, or additional
Securities. On each settlement date (estimated to be three business days after
the applicable date on which Securities were deposited in a Trust), the Units
will be released for delivery to investors and the deposited Securities will be
delivered to the Trustee. As additional Units are issued by the Trusts as a
result of the deposit of cash (or a letter of credit in lieu of cash) with
instructions to purchase additional Securities, the aggregate value of the
Securities in the Trusts will be increased and the fractional undivided
interest in the Trusts represented by each Unit will be decreased. There is no
limit on the time period during which the Sponsor may continue to make
additional deposits of Securities into the Trusts.
During the 90-day period following the Initial Date of Deposit additional
deposits of cash or Securities in connection with the issuance and sale of
additional Units will maintain, to the extent practicable, the original
proportionate relationship among the number of shares of each Security in the
Portfolios of each of the Trusts. The proportionate relationship among the
Securities in each of the Trusts will be adjusted to reflect the occurrence of
a stock dividend, a stock split or a similar event which affects the capital
structure of the issuer of a Security in the Trusts but which does not affect
that Trust's percentage ownership of the common stock equity of such issuer at
the time of such event. It may not be possible to maintain the exact original
proportionate relationship among the Securities deposited on the Initial Date
of Deposit because of, among other reasons, purchase requirements, changes in
prices, brokerage commissions or unavailability of Securities. Replacement
Securities may be acquired under specified conditions when
14
<PAGE>
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 meeting certain
requirements 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 2,700 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.
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
15
<PAGE>
. 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. The performance of the
Broadband Portfolio may be compared to the performance of the Russell 1000
Technology Index, or other comparable index type product. The performance of
the Wireless Portfolio may be compared to the performance of the Philadelphia
Wireless Telecom Index, the Amex North American Telecom Index, or other
comparable index type product. As with other performance data, performance
comparisons should not be considered representative of a Trust's relative
performance for any future period. Advertising and sales literature for the
Trusts may also include excerpts from the Sponsor's research reports on one or
more of the stocks in the Trusts, including a brief description of its
businesses and market sector, and the basis on which the stock was selected.
All of the domestic Securities are publicly traded either on a stock exchange
or in the over-the-counter market. Most of the contracts to purchase Securities
deposited initially in each of the Trusts are expected to settle in three
business days, in the ordinary manner for such Securities. Any foreign
Securities are publicly traded on a variety of foreign stock exchanges.
Settlement of contracts for foreign Securities varies by country and may take
place prior to the settlement of purchase of Units on the Initial Date of
Deposit.
Each of the Trusts consists of such Securities as may continue to be held
from time to time in that Trust and any additional and replacement Securities
and any money market instruments acquired and held by such Trust pursuant to
the provisions of the Indenture (including the provisions with respect to the
deposit into the Trusts of Securities in connection with the sale of additional
Units to the public) together with undistributed income therefrom and
undistributed and uninvested cash realized from the disposition of Securities.
(See Administration of the Trusts--Accounts and Distributions; Trust
Supervision.) The Indenture authorizes, but does not require, the Trustee to
invest the net proceeds of the sale of any Securities in eligible money market
instruments to the extent that the proceeds are not required for the redemption
of Units. Any money market instruments acquired by a Trust must be held until
maturity and must mature no later than the next Distribution Day and the
proceeds distributed to Holders at that time. If sufficient Securities are not
available at what the Sponsor considers a reasonable price, excess cash
received on the creation of Units may be held in an interest-bearing account
with the Trustee until that cash can be invested in Securities.
Neither the Sponsor nor the Trustee shall be liable in any way for any
default, failure or defect in any of the Securities. However, should any
contract deposited hereunder (or to be deposited in connection with the sale of
additional Units) fail, the Sponsor shall, on or before the next following
Distribution Day, cause to be refunded the attributable sales charge, plus the
attributable Market Value of Securities listed under the Portfolio for the
relevant Trust, unless substantially all of the monies held in such Trust to
cover the purchase are reinvested in replacement Securities in accordance with
the Indenture (see Administration of the Trusts--Trust Supervision).
Because certain of the Securities from time to time may be sold, or their
percentage may be reduced under certain extraordinary circumstances
16
<PAGE>
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 on the Securities will be declared or
paid in the future.
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 59.24% of
the Broadband Portfolio and 53.61% of the Wireless 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 18.45% of the Broadband Portfolio and 8.46% of the
Wireless 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."
17
<PAGE>
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 that the
Securities will have to be sold to meet Trust expenses. See Expenses and
Charges -- Payment of Expenses. Any such sales may result in capital gains or
losses to Holders. See Taxes.
Fixed Portfolio
Investors should be aware that the Trusts are not "managed" and as a result,
the adverse financial condition of a company will not result in the elimination
of its securities from the Portfolios of each of the Trusts except under
extraordinary circumstances. Investors should note in particular that the
Securities were selected on the basis of the criteria set forth under
Objectives of the Trusts and that the Trusts may continue to purchase or hold
Securities originally selected through this process even though the evaluation
of the attractiveness of the Securities may have changed. A number of the
Securities in the Trusts may also be owned by other clients of the Sponsor.
However, because these clients may have differing investment objectives, the
Sponsor may sell
18
<PAGE>
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.
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
19
<PAGE>
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 and/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 -- Trust Supervision.
On the basis of the best information available to the Sponsor at the present
time, none of the Securities is subject to exchange control restrictions under
existing law which would materially interfere with payment to the Trusts of
dividends due on, or proceeds from sale of, the Securities either because the
particular jurisdictions have not adopted any currency regulations of this type
or because the issues qualify for an exemption, or the Trusts, as an
extraterritorial investor, has qualified its purchase of the Securities as
exempt by following applicable "validation" or similar regulatory or exemptive
procedures. However, there can be no assurance that exchange control
regulations might not be adopted in the future which might adversely affect
payments to the Trusts.
In addition, the adoption of exchange control regulations and other legal
restrictions could have an adverse impact on the marketability of international
securities in the Portfolios and on the ability of the Trusts to satisfy their
obligation to redeem Units tendered to the Trustee for redemption (see
Redemption).
Exchange Rate Fluctuation
In recent years, foreign exchange rates have fluctuated sharply. Income from
foreign equity
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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.
Broadband and Wireless Portfolios
Many companies in the Broadband Portfolio and the Wireless Portfolio will
only devote a portion of their resources to broadband and wireless
technologies. As a result the risks these companies face are the same general
operating risks as other technology, internet and communications, particularly
telecommunications companies.
The Portfolios' 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 each 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 market in which Internet companies compete is characterized by rapidly
changing technology, rapid product and service obsolescence, cyclical market
patterns, intense competition, evolving industry standards and frequent new
product introductions. The success of the issuers of the Securities depends in
substantial part on the timely and successful introduction of new products. An
unexpected change in one or more of the technologies affecting an issuer's
products or in the
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market for products based on a particular technology could have a material
adverse affect on an issuer's operating results. Furthermore, there can be no
assurance that the issuers of the Securities will be able to respond in a
timely manner to compete in the rapidly developing marketplace.
Based on the trading history of Internet stocks, factors such as the
announcement of new products, the development of new technologies or the
general condition of the industry have caused and are likely to cause the
market price of these stocks to fluctuate substantially. In addition internet
stocks have experienced extreme price and volume fluctuations that often have
been unrelated to the operating performance of such companies. This market
volatility may adversely affect the market price of the Securities and
therefore the ability of a Holder to redeem Units at a price equal to or
greater than the original price paid for such Units.
Many Internet companies rely on a combination of patents, copyrights,
trademarks and trade secret laws to establish and protect their proprietary
rights in their products and technologies. There can be no assurance that the
steps taken by the issuers of the Securities to protect their proprietary
rights will be adequate to prevent misappropriation of their technology or that
competitors will not independently develop technologies that are substantially
equivalent or superior to such issuers' technology. In addition, due to the
increasing public use of the internet, it is possible that other laws and
regulations may be adopted to address issues such as privacy, pricing,
characteristics, and quality of internet products and services. The adoption of
any such laws could have a material adverse impact on the Securities in each
Portfolio. The above factors could adversely affect the value of the Trust's
Units.
The Portfolios will both 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 a
Portfolio's Units. Telephone companies in the United States, for example, are
subject to both state and federal regulations affecting permitted rates of
returns and the kinds of services that may be offered. In addition, federal
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 each 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 each Portfolio may include securities of established suppliers of
traditional communication products and services, these Portfolios 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.
Certain companies whose securities are included in each Portfolio are engaged
in providing local, long-distance and wireless services, in the manufacture of
telecommunications products and in a wide range of other activities including
directory publishing, information systems and the operation of voice, data and
video telecommunications networks.
Payment on common stocks of companies in the telecommunications industry,
including local, long-distance and cellular service, the manufacture of
telecommunications equipment, and other
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ancillary services, is generally dependent upon the amount and growth of
customer demand, the level of rates permitted to be charged by regulatory
authorities and the effects of inflation on the cost of providing services and
the rate of technological innovation. To meet increasing competition, companies
may have to commit substantial capital, particularly in the formulation of new
products and services using new technology.
The domestic companies in each Portfolio may consist of former government
owned telecommunications systems that have been privatized in states. The
Sponsor cannot predict whether such privatization will continue in the future
or what, if any, effect this will have on the Portfolios.
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 net asset value per Unit of a
Trust. The net asset value per Unit of a Trust is calculated by adding the
combined market value of the Securities in a Trust (as determined by the
Trustee) to any cash held to purchase Securities, and then dividing that sum by
the number of Units of the Trust outstanding. The total sales charge (not
including the Creation and Development Fee) consists of an initial sales charge
and a deferred sales charge equal, in the aggregate, to a maximum charge of
2.50% of the Public Offering Price (2.564% of the net amount invested in
Securities).
The initial sales charge is computed by deducting the deferred sales charge
($15.00 per 1,000 Units) from the aggregate sales charge of 2.50%. The initial
sales charge on the Initial Date of Deposit is 1.00% of the Public Offering
Price. Subsequent to the Initial Date of Deposit, the amount of the initial
sales charge will vary with changes in the aggregate value of the Securities in
the Trusts. For example, the initial sales charge will exceed 1.00% if the
Public Offering Price exceeds $1,000 per 1,000 Units and will be less than
1.00% if the Public Offering Price is less than $1,000 per 1,000 Units. The
initial sales charge is deducted from the purchase price of a Unit at the time
of purchase and paid to the Sponsor.
The deferred sales charge is a monthly charge of $2.50 per 1,000 Units and is
accrued in six monthly installments commencing on September 1, 2001 and will be
charged to the Capital Account on the first day of each month thereafter
through February 1, 2002. As a result of the deferred sales charge being a
fixed dollar amount, if the Public Offering Price exceeds $1,000 per 1,000
Units, the deferred sales charge will be less than 1.50%, and if the Public
Offering Price is less than $1,000 per 1,000 Units, the deferred sales charge
will exceed 1.50%. If a Deferred Sales Charge Payment Date is not a business
day, the payment will be charged to the Trust on the next business day. To the
extent that the entire deferred sales charge of $15.00 per 1,000 Units has not
been deducted at the time of repurchase or redemption of Units prior to
February 1, 2002, any unpaid amount will be deducted from the proceeds or in
calculating an in-kind distribution. Units purchased pursuant to the
Reinvestment Plan are not subject to the remaining applicable deferred sales
charge deduction (see Reinvestment Plan).
Purchasers on January 9, 2001 (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 January 9, 2001 (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
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Distributions) on the date of delivery of the Units to the purchaser is added
to the Public Offering Price.
The initial sales charge applicable to quantity purchases is reduced on a
graduated scale for sales to any purchaser of at least 50,000 Units. Sales
charges are as follows:
<TABLE>
<CAPTION>
Initial Sales Charge
---------------------
Percent of Percent of Maximum Dollar
Offering Net Amount Amount Deferred
Number of Units* Price Invested Per 1,000 Units
---------------- ---------- ---------- ---------------
<S> <C> <C> <C>
Fewer than 50,000......................... 1.00% 1.010% $15.00
50,000 but less than 100,000.............. .75 .758 15.00
100,000 but less than 250,000............. .25 .253 15.00
250,000 but less than 1,000,000........... 0 0 15.00
</TABLE>
For purchasers of at least 1,000,000 Units or $1,000,000 or more, the total
sales charge will be 1.00% (or 1.010% of the net amount invested).
------------
* The 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 of the Portfolios or any portfolios of outstanding services of
Equity Focus Trusts--Sector Series 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.
The holders of units of any outstanding unit investment trust (the
"Exchangeable Series") may exchange units of the Exchangeable Series for units
of the Trust at their relative net asset values, subject only to the applicable
deferred sales charge. An exchange of Exchangeable Series units for Units of
the Trust will generally be a taxable event. The Sponsor reserves the right to
modify, suspend or terminate this exchange privilege at any time.
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 1.00% of the Public Offering Price
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(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 Deferred Sales Charge of $15.00 per 1,000 Units
accrued in six monthly installments of $2.50.
On the Initial Date of Deposit, the Sponsor also realized a profit or loss on
deposit of the Securities into each of the Trusts in the amount set forth under
Investment Summary, which equals the difference between the cost of the
Securities to a Trust (which is based on the aggregate value of the Securities
on the Date of Deposit) and the purchase price of such Securities to the
Sponsor. In the event that subsequent deposits are effected by the Sponsor with
the deposit of Securities (as opposed to cash or a letter of credit) with
respect to the sale of additional Units to the public, the Sponsor similarly
may realize a profit or loss. The Sponsor also may realize profits or sustain
losses as a result of fluctuations after the Initial Date of Deposit in the
aggregate value of the Securities and hence of the Public Offering Price
received by the Sponsor for Units. Cash, if any, made available by buyers of
Units to the Sponsor prior to the settlement dates for purchase of Units may be
used in the Sponsor's business and may be of benefit to the Sponsor.
The Sponsor also receives an annual fee at the maximum rate of $.25 per 1,000
Units for the administrative and other services which it provides during the
life of the Trusts (see Expenses and Charges--Fees). The Sponsor has not
participated as sole underwriter or manager or member of any underwriting
syndicate from which any of the Securities in the Portfolios on the Initial
Date of Deposit were acquired, except as indicated under Portfolio.
In maintaining a market for the Units (see Market for Units), the Sponsor
will also realize profits or sustain losses in the amount of any difference
between the prices at which it buys Units (based on the aggregate value of the
Securities) and the prices at which it resells such Units (which include the
sales charge) or the prices at which the Securities are sold after it redeems
such Units, as the case may be.
Creation and Development Fee
The Sponsor will receive a creation and development fee of $2.50 per 1,000
Units (the "Creation and Development Fee") and will be paid from the assets of
each Trust as of the close of the initial public offering period. This fee,
which has historically been included in the gross sales fee, compensates the
Sponsor for the creation and development of the Trusts, including the
determination of a Trust's objectives and policies and portfolio composition
and size, and selection of service providers and information services. No
portion of the Creation and Development Fee is applied to the payment of
distribution expenses or as compensation for sales efforts. Upon a repurchase,
redemption or exchange of units before the close of the initial public offering
period, the Creation and Development Fee will not be deducted from the
proceeds.
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
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<PAGE>
. amounts for distribution to Holders of record as of a date prior to the
evaluation.
The result of the above computation is divided by the number of Units
outstanding as of a date prior to the evaluation, and the result of such
computation is divided by the number of Units outstanding as of the date of
computation. The Sponsor may discontinue purchases of Units if the supply of
Units exceeds demand or for any other business reason. The Sponsor, of course,
does not in any way guarantee the enforceability, marketability or price of any
Securities in the Portfolios or of the Units. On any given day, however, the
price offered by the Sponsor for the purchase of Units shall be an amount not
less than the Redemption Price per Unit, based on the aggregate value of
Securities in a Trust on the date on which the Units of such Trust are tendered
for redemption (see Redemption).
The Sponsor may, of course, redeem any Units it has purchased in the
secondary market to the extent that it determines that it is undesirable to
continue to hold such Units in its inventory. Factors which the Sponsor will
consider in making such a determination will include the number of units of all
series of unit trusts which it has in its inventory, the saleability of such
units and its estimate of the time required to sell such units and general
market conditions. For a description of certain consequences of such redemption
for the remaining Holders, see Redemption.
REDEMPTION
Units may be redeemed by the Trustee at its corporate trust office upon
payment of any relevant tax without any other fee, accompanied by a written
instrument or instruments of transfer with the signature guaranteed by a
national bank or trust company, a member firm of any of the New York, Midwest
or Pacific Stock Exchanges, or in such other manner as may be acceptable to the
Trustee. In certain instances the Trustee may require additional documents such
as, but not limited to, trust instruments, certificates of death, appointments
as executor or administrator or certificates of corporate authority.
The Trustee is empowered to sell Securities in order to make funds available
for redemption if funds are not otherwise available in the Capital and Income
Accounts to meet redemptions (see Administration of the Trusts -- Accounts and
Distributions). 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 1,000,000 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).
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<PAGE>
In Kind Distributions on redemption of a minimum of 1,000,000 Units will be
held by the Bank of New York, as Distribution Agent, for the account, and for
disposition in accordance with the instructions of, the tendering Holder as
follows:
(a) If the tendering Holder requests cash payment, the Distribution Agent
shall sell the In Kind Distribution as of the close of business on the date
of tender and remit to the Holder not later than seven calendar days
thereafter the net proceeds of sale, after deducting brokerage commissions
and transfer taxes, if any, on the sale. The Distribution Agent may sell
the Securities through the Sponsor, and the Sponsor may charge brokerage
commissions on those sales. Since these proceeds will be net of brokerage
commissions, Holders who wish to receive cash for their Units should always
offer them for sale to the Sponsor in the secondary market before seeking
redemption by the Trustee. The Trustee may offer Units tendered for
redemption and cash liquidation to the Sponsor on behalf of any Holder to
obtain this more favorable price for the Holder.
(b) If the tendering Holder requests distribution in kind, the
Distribution Agent (or the Sponsor acting on behalf of the Distribution
Agent) shall sell any portion of the In Kind Distribution represented by
fractional interests in accordance with the foregoing and distribute net
cash proceeds to the tendering Holder together with certificates
representing whole shares of each of the Securities that comprise the In
Kind Distribution. (The Trustee may, however, offer the Sponsor the
opportunity to purchase the tendered Units in exchange for the numbers of
shares of each Security and cash, if any, which the Holder is entitled to
receive. The tax consequences to the Holder would be identical in either
case.)
Any amounts paid on redemption representing income received will be withdrawn
from the Income Account to the extent funds are available (an explanation of
such Account is set forth under Administration of the Trusts -- Accounts and
Distributions). In addition, in implementing the redemption procedures
described above, the Trustee and the Distribution Agent shall make any
adjustments necessary to reflect differences between the Redemption Price of
the Units and the value of the In Kind Distribution as of the date of tender.
To the extent that Securities are distributed in kind, the size of the Trust
will be reduced.
A Holder may tender Units for redemption on any weekday (a "Tender Day")
which is not one of the following: New Year's Day, Martin Luther King, Jr. Day,
President's Day, Good Friday, Memorial Day (observed), Independence Day, Labor
Day, Thanksgiving or Christmas. The right of redemption may be suspended and
payment postponed for any period, determined by the Securities and Exchange
Commission ("SEC"), (1) during which the New York Stock Exchange, Inc. is
closed other than for customary weekend and holiday closings, (2) during which
the trading on that Exchange is restricted or an emergency exists as a result
of which disposal or evaluation of the Securities is not reasonably practicable
or (3) for such periods as the SEC may by order permit.
Computation of Redemption Price Per Unit
Redemption Price per Unit is computed by the Trustee as of the Evaluation
Time on each June 30 and December 31 (or the last business day prior thereto),
as of the Evaluation Time next following the tender of any Unit for redemption
on any Tender Day, and on any other business day desired by the Trustee or the
Sponsor, by adding (1) the aggregate value of the Securities determined by the
Trustee, (2) amounts in a Trust including dividends 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
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<PAGE>
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 last reported sale
price on such exchange, which shall be deemed to be the New York Stock Exchange
if the Securites are listed thereon, (unless the Trustee deems such price
inappropriate as a basis for evaluation) or, if there is no last reported 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 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
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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, as
well as the Creation and Development Fee, will be obtained in the following
manner: (1) first, by deductions from the Income Accounts (see below), (2) to
the extent the Income Account funds are insufficient, by distribution from the
Capital Accounts (see below) (which will reduce income distributions from the
Accounts), (3) to the extent the Income and Capital Accounts are insufficient,
by selling Securities from the Portfolio and using the proceeds to pay the
expenses (thereby reducing the net asset value of the Units). Payment of the
Deferred Sales Charge will be made in the manner described under Administration
of the Trusts -- Accounts and Distributions below.
Since the Securities are all common stocks, and the income stream produced by
dividend payments thereon is unpredictable (see Description of the Trusts --
Risk Factors), the Sponsor cannot provide any assurance that dividends will be
sufficient to meet any or all expenses of the Trusts. If dividends are
insufficient to cover expenses, it is likely that Securities will have to be
sold to meet Trust expenses. Any such sales may result in capital gains or
losses to Holders. See Taxes.
ADMINISTRATION OF THE TRUSTS
Records
The Trustee keeps records of the transactions of the Trusts at its corporate
trust office including names, addresses and holdings of all Holders of record,
a current list of the Securities and a copy of the Indenture. Such records are
available to Holders for inspection at reasonable times during business hours.
Accounts and Distributions
Dividends payable to a Trust are credited by the Trustee to an Income
Account, as of the date on which the Trust is entitled to receive such
dividends as a holder of record of the Securities. All other receipts (i.e.,
return of capital, stock dividends, if any, and gains) will be credited by the
Trustee to a Capital Account. If a Holder elects to receive its distribution in
cash, any income distribution for the Holder as of the 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
only distribution for
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persons who purchase Units after the Record Day will be the Final Distribution
upon termination of the Trust. 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 or fee obligations, respectively. Although the Sponsor
may collect the Deferred Sales Charge monthly, to keep Units more fully
invested the Sponsor does not anticipate sales of Securities to pay the
Deferred Sales Charge until after the last Deferred Sales Charge Payment Date.
Proceeds of the disposition of any Securities not used to pay the Deferred
Sales Charge or to redeem Units will be held in the Capital Account and
distributed on the Final Distribution upon termination of the appropriate
Trust.
Purchases at Market Discount -- Certain of the shareholder dividend
reinvestment, stock purchase or similar plans maintained by issuers of the
Securities offer shares pursuant to such plans at a discount from market value.
Subject to any applicable regulations and plan restrictions, the Sponsor
intends to direct the Trustee to participate in any such plans to the greatest
extent possible taking into account the Securities held by the Trusts in the
issuers offering such plans. In such event, the Indenture requires that the
Trustee forthwith distribute in kind to the Distribution Agent the Securities
received upon any such reinvestment to be held for the accounts of the Holders
in proportion to their respective interests in the Trusts. It is anticipated
that Securities so distributed shall immediately be sold. Therefore, the cash
received upon such sale, after deducting sales commissions and transfer taxes,
if any, will be used for cash distributions to Holders.
The Trustee will follow a policy that it will place securities transactions
with a broker or dealer only if it expects to obtain the most favorable prices
and executions of orders. Transactions in securities held in the Trusts are
generally made in brokerage transactions (as distinguished from principal
transactions) and the Sponsor or any of its affiliates may act as brokers
therein if the Trustee expects thereby to obtain the most favorable prices and
execution. The furnishing of statistical and research information to the
Trustee by any of the securities dealers through which transactions are
executed will not be considered in placing securities transactions.
Trust Supervision
Each of the Trusts is a unit investment trust which normally follows a buy
and hold investment strategy and is not actively managed. Therefore the adverse
financial condition of an issuer will not necessarily require the sale of its
Securities from the Portfolio. However, each Portfolio is regularly reviewed.
Traditional methods of investment management for a managed fund (such as a
mutual fund) typically involve frequent changes in a portfolio of securities on
the basis of economic, financial and market analyses. However, while it is the
intention of the Sponsor to continue a Trust's investment in the Securities in
the original proportions, it has the power but not the obligation to direct the
disposition of the Securities upon institution of certain legal proceedings,
default under certain documents adversely affecting future declaration or
payment of anticipated dividends, or a substantial decline in price or the
occurrence of materially adverse credit factors that, in the opinion of the
Sponsor, would make the retention of the Securities detrimental to the
interests of the Holders. The Sponsor intends to review the desirability of
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
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of any sale of Securities not required for redemption of Units in eligible
money market instruments having fixed final maturity dates no later than the
next Distribution Day (at which time the proceeds from the maturity of said
instrument shall be distributed to Holders) which are selected by the Sponsor
and which will include only the following instruments:
(i) Negotiable certificates of deposit or time deposits of domestic banks
which are members of the Federal Deposit Insurance Corporation and which
have, together with their branches or subsidiaries, more than $2 billion in
total assets, except that certificates of deposit or time deposits of
smaller domestic banks may be held provided the deposit does not exceed the
insurance coverage on the instrument (which currently is $100,000), and
provided further that a Trust's aggregate holding of certificates of
deposit or time deposits issued by the Trustee may not exceed the insurance
coverage of such obligations and (ii) U.S. treasury notes or bills.
In the event a public tender offer is made for a Security or a merger or
acquisition is announced affecting a Security, the Sponsor may instruct the
Trustee to tender or sell the Security on the open market when in its opinion
it is in the best interest of the Holders of the Units to do so. In addition,
the Sponsor is required to instruct the Trustee to reject any offer made by an
issuer of any of the Securities to issue new Securities in exchange or
substitution for any Securities except that the Sponsor may instruct the
Trustee to accept or reject such an offer to take any other action with respect
thereto as the Sponsor may deem proper if (1) the issuer failed to declare or
pay anticipated dividends with respect to such Securities or (2) in the written
opinion of the Sponsor the issuer will probably fail to declare or pay
anticipated dividends with respect to such Securities in the reasonably
foreseeable future. Any Securities so received in exchange or substitution
shall be sold unless the Sponsor directs that they be held by the Trustee
subject to the terms and conditions of the Indenture to the same extent as
Securities originally deposited thereunder. If a Security is eliminated from
the Portfolio and no replacement security is acquired, the Trustee shall within
a reasonable period of time thereafter notify Holders of that Trust of the sale
of the Security. Except as stated in this and the following paragraphs, the
Trusts may not acquire any securities other than (1) the Securities and (2)
securities resulting from stock dividends, stock splits and other capital
changes of the issuers of the Securities.
The Sponsor is authorized to direct the Trustee to acquire replacement
Securities ("Replacement Securities") to replace any Securities, for which
purchase contracts have failed ("Failed Securities"), or, in connection with
the deposit of Additional Securities, when Securities of an issue originally
deposited are unavailable at the time of subsequent deposit, as described more
fully below. Replacement Securities that are replacing Failed Securities will
be deposited into a Trust within 110 days of the date of deposit of the
contracts that have failed at a purchase price that does not exceed the amount
of funds reserved for the purchase of Failed Securities. The Replacement
Securities shall satisfy certain conditions specified in the Indenture
including, among other conditions, requirements that the Replacement Securities
shall be publicly-traded common stocks; shall be issued by an issuer subject to
or exempt from the reporting requirements under Section 13 or 15(d) of the
Securities Exchange Act of 1934 (or similar provisions of law); shall not
result in more than 10% of a Trust consisting of securities of a single issuer
(or of two or more issuers which are Affiliated Persons as this term is defined
in the Investment Company Act of 1940) which are not registered and are not
being registered under the Securities Act of 1933 or result in a Trust owning
more than 50% of any single issue which has been registered under the
Securities Act of 1933; and shall have, in the opinion of the Sponsor,
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
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for a Trust, the Trustee shall, on the next Distribution Day that is more than
30 days thereafter, make a pro rata distribution of the amount, if any, by
which the cost to that Trust of the Failed Security exceeded the cost of the
Replacement Security. If Replacement Securities are not acquired, the Sponsor
will, on or before the next following Distribution Day, cause to be refunded
the attributable sales charge, plus the attributable Market Value of Securities
listed under Portfolios plus income attributable to the Failed Security. Any
property received by the Trustee after the Initial Date of Deposit as a
distribution on any of the Securities in a form other than cash or additional
shares of the Securities received in a non-taxable stock dividend or stock
split, shall be retained or disposed of by the Trustee as provided in the
Indenture. The proceeds of any disposition shall be credited to the Income or
Capital Account of a Trust.
The Indenture also authorizes the Sponsor to increase the size and number of
Units of the Trusts by the deposit of cash (or a letter of credit) with
instructions to purchase Additional Securities, contracts to purchase
Additional Securities, or Additional Securities in exchange for the
corresponding number of additional Units during the 90-day period subsequent to
the Initial Date of Deposit, provided that the original proportionate
relationship among the number of shares of each Security established on the
Initial Date of Deposit (the "Original Proportionate Relationship") is
maintained to the extent practicable. Deposits of Additional Securities
subsequent to the 90-day period following the Initial Date of Deposit must
replicate exactly the original proportionate relationship among the number of
shares of each Security comprising the Portfolio at the end of the initial 90-
day period.
With respect to deposits of cash (or a letter of credit) with instructions to
purchase Additional Securities, Additional Securities or contracts to purchase
Additional Securities, in connection with creating additional Units of a Trust
during the 90-day period following the Initial Date of Deposit, the Sponsor may
specify minimum amounts of additional Securities to be deposited or purchased.
If a deposit is not sufficient to acquire minimum amounts of each Security,
Additional Securities may be acquired in the order of the Security most under-
represented immediately before the deposit when compared to the Original
Proportionate Relationship. If Securities of an issue originally deposited are
unavailable at the time of subsequent deposit or cannot be purchased at
reasonable prices or their purchase is prohibited or restricted by law,
regulation or policies applicable to the Trusts or the Sponsor, the Sponsor may
(1) deposit cash or a letter of credit with instructions to purchase the
Security when practicable (provided that it becomes available within 110 days
after the Initial Date of Deposit), (2) deposit (or instruct the Trustee to
purchase) Securities of one or more other issues originally deposited or (3)
deposit (or instruct the Trustee to purchase) a Replacement Security that will
meet the conditions described above. Any funds held to acquire Additional or
Replacement Securities which have not been used to purchase Securities at the
end of the 90-day period beginning with the Initial Date of Deposit, shall be
used to purchase Securities as described above or shall be distributed to
Holders together with the attributable sales charge.
Reports to Holders
With each distribution the Trustee will furnish Holders with 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
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dollar amount per Unit outstanding on the last business day of such calendar
year; (2) as to the Capital Account: the disposition of any Securities (other
than pursuant to In Kind Distributions) and the net proceeds received
therefrom; the results of In Kind Distributions in connection with redemption
of Units; deductions for payment of applicable taxes and for fees and expenses
of the Trustee and counsel and certain other expenses, to the extent that the
Income Account is insufficient, and the balance remaining after such
distribution and deductions, expressed both as a total dollar amount and as a
dollar amount per Unit outstanding on the last business day of such calendar
year; (3) a list of the Securities held and the number of Units outstanding on
the last business day of such calendar year; (4) the Redemption Price per Unit
based upon the last computation thereof made during such calendar year; and (5)
amounts actually distributed during such calendar year from the Income Account
expressed both as total dollar amounts and as dollar amounts per Unit
outstanding on the record dates for such distributions.
In order to enable them to comply with federal and state tax reporting
requirements, Holders will be furnished with evaluations of Securities upon
request to the Trustee.
Book-Entry Units
Ownership of Units of each Trust will not be evidenced by certificates. All
evidence of ownership of the Units will be recorded in book-entry form either
at Depository Trust Company ("DTC") through an investor's broker's account or
through registration of the Units on the books of the Trustee. Units held
through DTC will be deposited by the Sponsor with DTC in the Sponsor's DTC
account and registered in the nominee name CEDE & CO. Individual purchases of
beneficial ownership interest in a Trust will be made in book-entry form
through DTC or the Trustee. Ownership and transfer of Units will be evidenced
and accomplished by book-entries made by DTC and its participants if the Units
are evidenced at DTC, or otherwise will be evidenced and accomplished by book-
entries made by the Trustee. DTC will record ownership and transfer of the
Units among DTC participants and forward all notices and credit all payments
received in respect of the Units held by the DTC participants. Beneficial
owners of Units will receive written confirmation of their purchases and sale
from the broker-dealer or bank from whom their purchase was made. Units are
transferable by making a written request properly accompanied by a written
instrument or instruments of transfer which should be sent registered or
certified mail for the protection of the Unit Holder. Holders must sign such
written request exactly as their names appear on the records of the Trusts.
Such signatures must be guaranteed by a commercial bank or trust company,
savings and loan association or by a member firm of a national securities
exchange.
Amendment And Termination
The Sponsor may amend the Indenture, with the consent of the Trustee but
without the consent of any of the Holders, (1) to cure any ambiguity or to
correct or supplement any provision thereof which may be defective or
inconsistent, (2) to change any provision thereof as may be required by the SEC
or any successor governmental agency and (3) to make such other provisions as
shall not materially adversely affect the interest of the Holders (as
determined in good faith by the Sponsor). The Indenture may also be amended in
any respect by the Sponsor and the Trustee, or any of the provisions thereof
may be waived, with the consent of the Holders of 51% of the Units, provided
that no such amendment or waiver will reduce the interest in a Trust of any
Holder without the consent of such Holder or reduce the percentage of Units
required to consent to any such amendment or waiver without the consent of all
Holders.
The Indenture will terminate upon the earlier of the disposition of the last
Security held thereunder or the Mandatory Termination Date specified under
Summary of Essential Information. The Indenture may also be terminated by the
Sponsor if the value
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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 the 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. In the event the Sponsor determines that such a redemption and
subsequent investment in a New Series by a Holder may be effected under
applicable law in a manner that will not result in the recognition of gain or
loss for U.S. Federal income tax purposes with respect to any Securities that
are included in the portfolio of the New Series, Holders will be notified at
least 30 days prior to the Rollover Notification Date of the procedures and
process necessary to facilitate such tax investment. Such purchaser may be
entitled to a reduced sales load (as disclosed in the prospectus for the New
Series) upon the purchase of units of the New Series.
Under the exchange and rollover privilege, the Sponsor's repurchase price
would be based upon the market value of the Securities in a Trust portfolio and
units in the Exchange Series or New Series will be sold to the Holder at a
price based on the aggregate market price of the securities in the portfolio of
the Exchange Series or New Series. Holders will pay their share of any
brokerage commissions on the sale of underlying Securities when their Units are
liquidated during the exchange or rollover. Exercise of the exchange or
rollover privilege by Holders is subject to the following conditions: (i) the
Sponsor must have units available of an Exchange Series or New Series during
initial public offering or, if such period is completed, must be maintaining a
secondary market in the units of the available Exchange Series or New Series
and such units must be available in the Sponsor's secondary market account at
the time of the Holder's elections; and (ii) exchange will be effected only in
whole units. Holders will not be permitted to advance any funds in excess of
their redemption in order to complete the exchange. Any excess proceeds
received from the Holder for exchange will be remitted to such holder.
It is expected that the terms of the Exchange Series or New Series will be
substantially the same as the terms of the Trusts described in this Prospectus,
and that similar reinvestment programs will be offered with respect to all
subsequent series of the Trusts. The availability of these options do not
constitute a solicitation of an offer to purchase units of an Exchange Series
or a New Series or any other security. A Holder's election to participate in
either of these options will be treated as an indication of interest only.
Holders should contact their financial professionals to find out what suitable
Exchange or New Series is available and to obtain a prospectus. Holders may
acquire units of those
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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 pursuant to a Trust's
"Reinvestment Plan." These additional Units will not be subject to any sales
charge. 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
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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 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 the Internal
Revenue Code (the "Code"), and does not address the tax consequences of Units
held by dealers, financial institutions, insurance companies or anyone who
holds Units as part of a hedge or straddle.
In the opinion of Paul, Hastings, Janofsky & Walker LLP, special counsel for
the Sponsor, under existing law:
1. The Trusts are not associations taxable as corporations for Federal
income tax purposes, and income received by the Trusts will be treated as
income of the Holders in the manner set forth in paragraph 3 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 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
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adjusted gross income. The deduction of fees and expenses is subject to
limitations 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 corporations 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. 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 the
Code imposes 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 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
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<PAGE>
period during which it held its Units. However, a Holder will have a taxable
gain or loss, which will generally 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 foreign taxes.
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. In addition, Holders may also 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
Units of 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 be eligible for tax-deferred rollover treatment and,
in very limited cases, special 10 year averaging. 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.
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<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, as amended ("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 Paul, Hastings, Janofsky &
Walker LLP, 399 Park Avenue, New York, New York 10022, as special counsel for
the Sponsor.
Auditors
The Statements of Financial Condition and the Portfolios included in this
Prospectus have been audited by KPMG LLP, independent auditors, as indicated in
their report with respect thereto, and is so included herein in reliance upon
the authority of said firm as experts in accounting and auditing.
Sponsor
Salomon Smith Barney Inc. ("Salomon Smith Barney"), was incorporated in
Delaware in 1960 and traces its history through predecessor partnerships to
1873. On September 1, 1998, Salomon Brothers, Inc. merged with and into Smith
Barney Inc. ("Smith Barney") with Smith Barney surviving the merger and
changing its name to Salomon Smith Barney Inc. The merger of Salomon Brothers
Inc. and Smith Barney followed the merger of their parent companies in November
1997. Salomon Smith Barney, an investment banking and securities broker-dealer
firm, is a member of the New York Stock Exchange, Inc. and other major
securities and commodities exchanges, the National Association of Securities
Dealers, Inc. and the Securities Industry Association. Salomon Smith Barney is
an indirect wholly-owned subsidiary of Citigroup Inc. The Sponsor or an
affiliate is investment adviser, principal underwriter or distributor of more
than 60 open-end investment companies and investment manager of 12 closed-end
investment companies. Salomon Smith Barney also sponsors all Series of
Corporate Securities Trust, Government Securities Trust, Harris, Upham Tax-
Exempt Fund and Tax Exempt Securities Trust, and acts as co-sponsor of most
Series of Defined Asset Funds.
39
<PAGE>
EQUITY FOCUS
TRUSTS
----------------------------------------------
Sector Series, Emerging Sector Portfolios
Broadband Technologies 2001A
Wireless Technologies 2001A
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, DC under the Securities Act of 1933 (file no.
333-51746 and the Investment Company Act of 1940 (file no. 811-3491), and to
which reference is hereby made. Information may be reviewed and copied at the
Commission's Public Reference Room, and information on the Public Reference
Room may be obtained by calling the SEC at 1-202-942-8090. Copies may be
obtained from the SEC by:
. electronic request (after paying a duplicating fee) at the following E-
mail address: [email protected]
. visiting the SEC internet address: http://www.sec.gov
. writing: Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, DC 20549-6009
--------------------------------------------------------------------------------
Sponsor:
Index Salomon Smith Barney Inc.
<TABLE> 7 World Trade Center
<S> <C> 40th Floor
Investment Summary 2 New York, New York 10048
Summary of Essential Information 7 (212) 816-6000
Independent Auditors' Report 9
Statements of Financial Condition 10 Trustee:
Portfolios 11
Description of the Trusts 14 The Bank of New York
Risk Factors 17 101 Barclay Street
Public Sale of Units 23 New York, New York 10286
Market for Units 25 (800) 221-7771
Redemption 26
Expenses and Charges 28
Administration of the Trusts 29
Exchange and Rollover Privileges 34
Reinvestment Plan 35
Resignation, Removal and Limitations
on Liability 35
Taxes 36
Miscellaneous 39
</TABLE>
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SalomonSmithBarney
----------------------------
A member of citigroup [LOGO]
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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. The Trust is registered as a unit investment
trust under the Investment Company Act of 1940. Such registration does not
imply that the Trust or any of its Units have been guaranteed, sponsored,
recommended or approved by the United States or any other state or any agency
or office thereof.
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Salomon Smith Barney is the service mark used by Salomon Smith Barney Inc.
UT 6719
