PROSPECTUS \(em PART A
This Prospectus consists of two parts. Part A consists of an Investment
Summary relating to the Trusts of Series A of the Fund, a statement of
financial condition and a statement of operations and changes in net assets
for each Trust and a summary of each Trust's portfolio. Part B contains a
general description of the Fund. Part A may not be distributed unless
accompanied by Part B.
THE SMITH BARNEY SHEARSON FUND OF
STRIPPED ("ZERO") U.S. TREASURY SECURITIES, SERIES A
(A Guardian Insurance & Annuity Company, Inc. Separate Account Investment)
The Smith Barney Shearson Fund of Stripped ("Zero") U.S. Treasury
Securities (the "Fund") was formed for the purpose of providing, when the
Units issued by it are held to maturity of the underlying securities, safety
of capital and income through investment in portfolios consisting of debt
obligations of the United States of America (the "Securities"). Series A of
the Fund originallyconsisted of three separate unit investment trusts
designated as the 1991 Trust,the 1995 Trust and the 2004 Trust (the
"Trusts") holding Securities with maturities corresponding to their
respective designations. The 1991 Trust expired on November 15, 1991.
Substantially all of the Securities in each Trust are debt obligations of
the United States of America which have been stripped of their
unmatured interest coupons, coupons stripped from debt obligations of the
United States of America and receipts and certificates for such stripped
debt obligations and stripped coupons ("Stripped Treasury Securities"). The
remaining Securities in each Trust consist of interest-bearing debt
obligations of the United States of America ("Treasury Notes") deposited to
provide income for payment of Trust expenses.
Stripped Treasury Securities do not make any periodic payments of
interest prior to their maturities; accordingly, each Trust's portfolio was
acquired at a deep discount. There is no assurance that the objectives of
safety of capital and income will be met if the units of fractional
undivided interest in a Trust (the "Units") are sold prior to the maturity
of the underlying Securities in that Trust, as market prices of the
Securities before maturity, and therefore of the Units, will vary with
changes in interest rates and other factors. Moreover,the value of
Stripped Treasury Securities, and hence of the Units, will be subject to
greater fluctuations in response to changing interest rates than the value
of debt obligations making periodic distributions of interest.
The offering price of the Units of each Trust is calculated on the basis
of the aggregate offering side evaluation of the underlying Securities in
that Trust, plus a transaction charge of 1.50% or less of the price so
determined (the "Offering Price"). The Sponsor has undertaken to maintain a
secondary market for Units of each Trust, also at a price based upon the
aggregate offering side evaluation of the underlying Securities (the
"Sponsor's Repurchase Price").
The Guardian Separate Account B (the "Account") of The Guardian Insurance
& Annuity Company, Inc. ("GIAC") is currently the only eligible purchaser
of Units of each Trust from the Sponsor. The Account invests in Units of
the Trusts to fund benefits under Variable Life Insurance Policies issued by
GIAC (the "Policies") in accordance with allocation instructions received
from purchasers of Policies. These allocation rights are further described
in the accompanying Prospectus for the Policies. The rights described in
this Prospectus of the Account and the Sponsor (insofar as it holds Units)
as holders of Units should be distinguished from the rights of a Policy
owner set forth in the accompanying Prospectus describing the Policies.
Read and retain both parts of this Prospectus for future reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SMITH BARNEY SHEARSON INC.
Sponsor
April 29, 1994
THE SMITH BARNEY SHEARSON FUND OF
STRIPPED ("ZERO") U.S. TREASURY SECURITIES, SERIES A
INVESTMENT SUMMARY OF SERIES A AS OF DECEMBER 31, 1993
Series A consists of two separate unit investment trusts, the 1995 Trust
and the 2004 Trust, designated for the maturities of their respective
underlying portfolios.
1995 2004
Trust Trust
----------- ------------
FACE AMOUNT OF SECURITIES $ 9,216,720 $ 12,439,560
NUMBER OF UNITS 9,216,720 12,439,560
FRACTIONAL UNDIVIDED INTEREST IN TRUST
REPRESENTED BY EACH UNIT 1/9,216,720th 1/12,439,560th
OFFERING PRICE PER 1,000 UNITS*
Aggregate offering side evaluation of
Securities in Trust** $ 8,550,057 $ 6,424,958
=========== ============
Divided by number of Units times 1,000 $ 927.668 $ 516.494
Plus the applicable transaction charge*** 4.666 7.866
Offering Price per 1,000 Units* $ 932.334 $ 524.360
SPONSORS REPURCHASE PRICE PER 1,000 UNITS
(based on offering side evaluation of
underlying Securities) $ 927.668 $ 516.494
REDEMPTION PRICE PER 1,000 UNITS (based on bid
side evaluation of underlying Securities)**** $ 927.168 $ 514.878
CALCULATION OF ESTIMATED NET ANNUAL INTEREST
INCOME FROM TREASURY BONDS PER 1,000 UNITS
Gross annual income per 1,000 Units $ .46 $ .46
Less estimated annual expenses per 1,000 Units .46 .46
Net annual income per 1,000 Units $ 0.00 $ 0.00
DISTRIBUTIONS
Distributions will be made on the first
Business Day following the maturity of
Securities in a Trust to holders of record
on the Business Day immediately preceding
the date of such distribution
TRUSTEES MONTHLY FEE
Per $1,000 face amount of underlying Securities
(see "Expenses and Charges" in Part B) $ .025 $ .025
EVALUATORS FEE FOR EACH EVALUATION: $5.00
EVALUATION TIME: 3:00 P.M., New York Time, on each Business Day
MANDATORY TERMINATION DATE: January 1, 2035
MINIMUM VALUE OF FUND
Any Trust may be liquidated by the Trustee
if the value of that Trust is less
than 40% of the principal amount of
Securities held in such Trust on the
Initial Date of Deposit.
- ------------
*These figures are computed by dividing the aggregate offering side
evaluation of the underlying Securities in the particular Trust (the
price at which they could be purchased directly by the public if
available) by the number of Units of the Trust outstanding, multiplying
the result times 1,000 and adding the applicable transaction charge as
described below. These figures assume a purchase of 1,000 Units. The
price of a single Unit, or any multiple thereof, is calculated simply by
dividing the Offering Price per 1,000 Units above by 1,000, and
multiplying by the number of Units.
**This figure includes amortization of discount on the Stripped
Treasury Securities accreting to the expected date of settlement
(normally five Business Days, as defined under "Sale and Redemption of
Units Q Pricing of Units" in Part B, after purchase) for Units as if
purchased on their date of deposit. Interest on the Treasury Notes
accruing to the date five Business Days after deposit of such Notes will
be paid by the Trustee to the Sponsor as a special distribution and
recovered by the Trustee from subsequent payments of interest on the
Treasury Notes in the Trust, and is therefore not included in the
evaluation of Securities in a Trust. See "Sale and Redemption of Units
Q Pricing of Units" in Part B.
***The transaction charges currently applicable to the 1995 Trust and the
2004 Trust are .50%, and 1.50% of their respective Offering Prices per
1,000 Units (.503% and 1.523%, respectively, of the net amount invested
in Securities). Transaction charges will decrease as the Trusts
approach maturity. See "Sale and Redemption of Units Q Sale of Units"
in Part B. On September 30, 1985, the Account purchased from the
Sponsor all of the Units of each Trust issued on that date in a private
placement and the Sponsor waived all transaction charges in connection
with such purchase.
****Figures shown are $5.166 and $9.482 less than the Offering Price per
1,000 Units and $.500 and $1.616 less than the Sponsor's Repurchase Price
per 1,000 Units, with respect to the 1995 Trust and the 2004 Trust,
respectively.
+Plus cash on hand, accrued interest on Treasury notes and all other
assets of the Trust less any accrued expenses and any distribution
payable to Holders. See "Sale and Redemption of Units Q Pricing of
Units" in Part B.
Description of the Fund
The objective of the Fund is to provide safety of capital and income
through investment in portfolios consisting primarily of Stripped Treasury
Securities. Each of the Trusts constituting Series A of the Fund consists of
Stripped TreasurySecurities with maturities of approximately 1 1/2 and
10 1/2 years, respectively, and Treasury Notes deposited in order to
provide income with which to pay anticipated expenses of each Trust. The
Sponsor intends to deposit additional Stripped Treasury Securities, with
maturities identical to those of the Securities described in the portfolio
of each Trust below, in each of the Trusts. Additional Treasury Notes with
maturities identical to those of the Notes described in the portfolio of
each Trust will be deposited to the extent necessary to maintain a
constant proportion of Treasury Notes to Stripped Treasury Securities in
each of the Trusts. See "Description of the Fund Q Structure" in Part B of
this Prospectus.
It is expected that for each 1,000 Units of a Trust purchased, a Holder
will receive total distributions of approximately $1,000 for Units held
until maturity of the underlying Securities of that Trust. Actual
distributions may be more or less than this amount, however, as a result of
changes in the expenses incurred by a Trust or sales of Securities held by a
Trust prior to maturity in order to meet redemptions of Units. See "Sale
and Redemption of Units", "Expenses and Charges" and "Administration of the
Fund Q Accounts and Distributions" in Part B.
Currently, Units are sold only to the Account to fund benefits under
Policies issued by GIAC. The interest of a Policy owner in the Units is
subject to the terms of the Policy and is described in the accompanying
Prospectus for the Policies, which should be reviewed carefully by a person
considering the purchaseof a Policy. That Prospectus describes the
relationship between increases or decreases in the net asset value of, and
any distributions on, Units and the benefits provided under a Policy. The
rights described in this Prospectus of the Account and the Sponsor (insofar
as it holds Units) as holders of Units should be distinguished from the
rights of a Policy owner set forth in the Prospectus describing the
Policies. For purposes of this Prospectus, the term "Holder" shall refer
to the Account or, when appropriate, the Sponsor. GIAC and the Sponsor may
mutually agree to terminate the offering of Units of any Trust at any time.
Risk Factors
An investment in Units of a Trust should be made with an understanding
of the risks that such an investment may entail, including the risk that
the value of the Units will decline with increases in interest rates.
Unlike an investor in funds comprised of securities making periodic
distributions, an investor in the Fund virtually eliminates the risk of
being unable to invest distributions at a rate as high as the anticipated
yield on Trust Units, but will forego the ability to reinvest such yield
at higher rates in the future. The market value of the underlying Securities
in a Trust prior to their maturities, and therefore the value of the Units of
that Trust, will fluctuate with changesin interest rates and other factors.
Moreover, the value of obligations of a "zero coupon" nature, such as the
Stripped Treasury Securities underlying the Units, and therefore of the Units,
will be subject to greater fluctuations in response to changing interest
rates than the value of debt obligations making periodic distributions of
interest. Accordingly, while the full faith and credit of the United States
Government protects against credit risks on the Securities in each Trust,
sales of Units before the maturity of the underlying portfolio Securities
at a time when interest rates have increased will involve greater market
risk than in a trust which is invested in interest-bearing debt obligations.
This risk is greater when the period to maturity is longer. See "Description
of the Fund Q Risk Factors" in Part B of this Prospectus.
Securities
Each Trust consists primarily of Stripped Treasury Securities, which are
debt obligations of the United States of America that have been stripped of
their unmatured interest coupons, coupons stripped from debt obligations of
the United States of America and receipts and certificates for such
stripped debt obligations and stripped coupons. The stripping of the
interest coupons causes the Stripped Treasury Securities to be purchased by
each Trust at a deep discount. See "Description of the Fund Q
Characteristics of the Securities" in Part B. Each Trust also consists of
a Treasury Note or Notes providing interest income with which to pay
anticipated expenses of such Trust. The Securities are not rated but, in
the opinion of the Sponsor, have credit characteristics comparable to those
of Securities rated "AAA" by nationally recognized rating agencies.
Distributions
There will be no periodic payments of interest on the Securities other
than interest on the Treasury Notes in each Trust, which will be used to
pay anticipated expenses of the Trust holding such Notes. Consequently,
there should be no distributions of interest income. However, each
Stripped Treasury Security will be treated for Federal income tax purposes
as having "original issue discount," which must be amortized over the term
of the Stripped Treasury Security and included in a Holder's gross income
before the Holder receives the cash attributable to such income.
Distributions will be made in cash when the Securities in each Trust
mature, and may include any amount received on the sale of Securities in
order to redeem Units which exceeds the amount necessary to meet such
redemptions. See "Administration of the Fund Q Accounts and Distributions"
and "Taxes" in Part B.
Market For Units
The Sponsor has undertaken to maintain a secondary market for Units of
each Trust based on the offering side evaluation of the underlying
Securities. In the absence of such a market, a Holder will nonetheless be
able to dispose of Units through redemption at prices based on the bid side
evaluation of the underlying Securities of the Trust in which it holds
Units. Market conditions may cause the price received upon resale to the
Sponsor or redemption to be more or less than the amount paid for Units.
See "Sale and Redemption of Units" in Part B.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Sponsor and Holders of
The Smith Barney Shearson Fund of Stripped ("Zero")
U.S. Treasury Securities, Series A:
We have audited the statements of financial condition of THE SMITH BARNEY
SHEARSON FUND of STRIPPED ("ZERO") U.S. TREASURY SECURITIES, SERIES A,
formerly The Shearson Lehman Brothers Fund of Stripped ("Zero") U.S.
Treasury Securities, Series A (comprised of the 1995 Trust and the 2004
Trust) including the related Portfolios, as of December 31, 1993 and 1992
for each of the Trusts and the related statements of operations and changes
in net assets and supplemental information for each of the three years in
the period ended December 31, 1993. These financial statements and
supplemental information are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements and
supplemental information are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmations from the custodian of cash and securities owned at December
31, 1993 and 1992. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and supplemental information
referred to above present fairly, in all material respects, the financial
position of The Smith Barney Shearson Fund of Stripped ("Zero") U.S.
Treasury Securities, Series A at December 31, 1993 and 1992 and the results
of its operations and the changes in its net assets and supplemental
information for each of the three years in the period ended December 31,
1993, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND
New York, New York
February 24, 1994
THE SMITH BARNEY SHEARSON FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
Statement of Financial Condition as of December 31, 1993 and 1992
1995 Trust 2004 Trust
1993 1993
---------- ----------
Trust Property
Investment in Securities at value (amortized
cost $7,949,959 in 1995 Trust and $5,169,319
in 2004 Trust) $8,545,444 $6,404,855
Other assets 4,698 10,554
---------- ----------
$8,550,142 $6,415,409
========== ==========
Interest of Holders: 9,216,720 units in 1995
Trust and 12,439,560 units in 2004 Trust of
fractional undivided interest outstanding:
Cost of Trust units, net of gross transaction
charges $5,587,012 $4,007,202
Unrealized appreciation of investment 595,485 1,235,536
Undistributed net investment income 2,367,645 1,172,671
---------- ----------
Net assets $8,550,142 $6,415,409
---------- ----------
Net asset value per unit $ 0.9277 $ 0.5157
---------- ----------
1995 Trust 2004 Trust
1992 1992
---------- ----------
Trust Property
Investment in Securities at value (amortized
cost $7,506,793 in 1995 Trust and $5,177,954
in 2004 Trust) $8,286,228 $5,851,321
Subscriptions receivable 173,550
Other assets 4,871 9,907
---------- ----------
$8,464,649 $5,861,228
---------- ----------
Interest of Holders: 9,768,920 units in 1995
Trust and 13,845,160 units in 2004 Trust of
fractional undivided interest outstanding:
Cost of Trust units, net of gross transaction
charges $5,540,986 $4,185,946
Unrealized appreciation of investment 779,435 673,367
Undistributed net investment income 2,144,228 1,001,915
---------- ----------
Net assets $8,464,649 $5,861,228
---------- ----------
Net asset value per unit $ 0.8665 $ 0.4233
---------- ----------
See notes to financial statements.
THE SMITH BARNEY SHEARSON FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
Statement of Operations and Changes in Net Assets
For the Years Ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1995 Trust 2004 Trust
------------------------------- -----------------------------
1993 1992 1991 1993 1992 1991
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operations
Interest income $641,118 $645,669 $595,177 $411,602 $426,486 $479,938
Expenses:
Trustee fees 3,235 3,078 3,006 4,142 4,347 5,362
Other 1,075 1,522 1,505 1,162 1,522 1,505
-------- -------- -------- -------- -------- --------
Net investment income 636,808 641,069 590,666 406,298 420,617 473,071
Realized gain (loss)
on sale of securities 135,178 67,391 2,978 222,439 86,997 178,645
Increase in unrealized
appreciation
(depreciation) (183,950) (120,150) 546,962 562,169 (35,456) 414,379
-------- -------- -------- -------- -------- --------
Net increase (decrease)
in net assets from
operations 588,036 588,310 1,140,606 1,190,906 472,158 1,066,095
-------- -------- -------- -------- -------- ---------
Capital Share
Transactions:
Sales of units 632,766 535,602 538,800 355,249 313,886 436,686
Redemption of Units:
Principal (586,740) (661,253) (197,522) (533,993) (380,691) (1,334,762)
Net investment income (413,391) (338,723) (89,357) (235,542) (140,790) (452,887)
Realized (gains) losses (135,178) (67,391) (2,978) (222,439) (86,997) (178,645)
-------- -------- -------- -------- -------- ----------
(502,543) 531,765 248,943 (636,725) (294,592) (1,529,608)
-------- -------- -------- -------- -------- ---------
Increase (decrease) in
net assets 85,493 56,545 1,389,549 554,181 177,566 (463,513)
Net assets:
Beginning of year 8,464,649 8,408,104 7,018,555 5,861,228 5,683,662 6,147,175
--------- --------- --------- --------- --------- ---------
End of year $8,550,142 $8,464,649 $8,408,104 $6,415,409 $5,861,228 $5,683,662
========== ========== ========== ========== ========== ==========
Units sold 702,800 652,600 702,800 702,800 803,200 1,305,200
========== ========== ========== ========== ========== ==========
Units redeemed 1,255,000 1,305,200 401,600 2,108,400 1,606,400 5,773,000
========== ========== ========== ========== ========== ==========
- -------
* For the period January 1, 1991 to November 15, 1991 date of maturity of
securities in 1991 Trust.
</TABLE>
See notes to financial statements.
THE SMITH BARNEY SHEARSON FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
Portfolio as of December 31, 1993
<TABLE>
Aggregate
Principal Maturity Amortized
Amount Title of Security Coupon Date Cost Value
- ---------- ----------------- ------ -------- --------- -----------
1995 Trust
- ----------
<S> <C> <C> <C> <C> <C>
$ 9,180,000 Stripped U.S. Treasury
Securities -0- 11/15/95 $7,907,606 $8,503,893
36,720 U.S. Treasury Bonds 11.50% 11/15/95 42,353 41,551
- ----------- ---------- ----------
$ 9,216,720 $7,949,959 $8,545,444
=========== ========== ==========
2004 Trust
- ----------
$12,390,000 Stripped U.S. Treasury
Securities -0- 11/15/04 $5,105,998 $6,332,901
49,560 U.S. Treasury Bonds 11.625% 11/15/04 63,321 71,954
- ----------- ---------- ----------
$12,439,560 $5,169,319 $6,404,855
=========== ========== ==========
</TABLE>
Portfolio as of December 31, 1992
<TABLE>
Aggregate
Principal Maturity Amortized
Amount Title of Security Coupon Date Cost Value
- ---------- ----------------- ------ -------- --------- -----------
1995 Trust
- ----------
<S> <C> <C> <C> <C> <C>
$ 9,530,000 Stripped U.S. Treasury
Securities -0- 11/15/95 $7,463,088 $8,241,640
38,120 U.S. Treasury Bonds 11.50% 11/15/95 43,705 44,588
- ----------- ---------- ----------
$ 9,568,120 $7,506,793 $8,286,228
=========== ========== ==========
2004 Trust
- ----------
$13,790,000 Stripped U.S. Treasury
Securities -0- 11/15/04 $5,108,670 $5,775,666
55,160 U.S. Treasury Bonds 11.625% 11/15/04 69,284 75,655
- ----------- ---------- ----------
$13,845,160 $5,177,954 $5,851,321
=========== ========== ==========
Note: The aggregate values based on offering side valuation at December 31, 1993, were:
1995 Trust............ $8,550,057
==========
2004 Trust............ $6,424,958
==========
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
THE SMITH BARNEY SHEARSON FUND OF STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
1. Significant Accounting Policies
The Fund is registered under the Investment Company Act of 1940 as a
Unit Investment Trust. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of
its financial statements. The policies are in conformity with generally
accepted accounting principles.
Valuation of securities by the evaluator was made on the basis of
current bid prices for the obligations.
The difference between the initial cost of Stripped U.S. Treasury
Securities and principal amount of each security is being amortized over
the period to its maturity date using the interest method.
All items of income and expenses are attributable to the unit holders,
on a pro rata basis, for federal income tax purposes in accordance with the
grantor trust rules of the Internal Revenue Code. Accordingly, no
provision for taxes is required to be made by the Trusts.
2. During the period ended December 31, 1993, the Sponsor, Smith Barney
Shearson Inc., received transaction charges aggregating $3,766 and $8,713
with respect to the 1995 Trust and 2004 Trust, respectively.
3. At December 31, 1993, the cost of investments for federal income tax
purposes was the same as the cost for financial reporting purposes. There
was gross unrealized depreciation of $1,527 and $2,253 and gross unrealized
appreciation of $597,012 and $1,237,789 for the 1995 Trust and 2004 Trust,
respectively.
4. The aggregate cost of purchases of securities during the year ended
December 31, 1993 was $632,766 and $355,249 for the 1995 Trust and 2004
Trust, respectively. The aggregate proceeds from sales during the year
ended December 31, 1993 was $1,135,309 and $991,974 for the 1995 Trust and
2004 Trust, respectively.
5. Supplemental Information:
Selected data per 1,000 units of the Fund outstanding throughout the
years ended December 31, 1993, 1992 and 1991, respectively, are as follows
(based on average units outstanding throughout the years):
1995 Trust 2004 Trust
------------------------ -----------------------
1993 1992 1991 1993 1992 1991
------- ------- ------- ------- ------- -------
Interest income $ 67.18 $ 63.98 $ 59.26 $ 32.70 $ 30.11 $ 27.69
Expenses .45 .46 .45 .42 .41 .40
------- ------- ------- ------- ------- -------
Net investment income 66.78 63.52 58.81 32.28 29.70 27.29
Increase in unrealized
appreciation
(depreciation) (5.54) (3.83) 54.48 60.11 5.63 39.15
------- ------- ------- ------- ------- -------
Net increase in net assets
from operations 61.19 59.69 113.29 92.39 35.33 66.44
Net assets:
Beginning of year 866.49 806.80 693.51 423.34 388.01 321.57
------- ------- ------- ------- ------- -------
End of year $927.68 $866.49 $806.80 $515.73 $423.34 $388.01
------- ------- ------- ------- ------- -------
If the amount shown per 1,000 units outstanding throughout the period
does not accord with the change in the aggregate gains or losses in the
portfolio of securities for the period, it is because of the timing of
sales and redemptions of the Funds units in relation to fluctuating market
values for the portfolio.
For the period January 1, 1991 through November 15, 1991 date of maturity
of securities in 1991 Trust.
THE SMITH BARNEY SHEARSON FUND OF
STRIPPED ("ZERO")
U.S. TREASURY SECURITIES, SERIES A
PROSPECTUS Q -- PART B
Note: Part B of this Prospectus may not be distributed unless accompanied
by Part A.
DESCRIPTION OF THE FUND
Structure
Series A of The Smith Barney Shearson Fund of Stripped ("Zero") U.S.
Treasury Securities (the "Fund") originally consisted of three separate
unit investment trusts (the "Trusts") created by one Trust Indenture (the
"Indenture")* among Shearson Lehman Brothers Inc. (the "Sponsor"), The
Bank of New York (the "Trustee") and Kenny S&P Evaluation Services
(formerly called Standard & Poor's Corporation) (the "Evaluator") under New
York law. One of the Trusts expired on November 15, 1991. In July, 1993,
Smith Barney Shearson Inc. became the Sponsor of the Fund (see "Sponsor").
As of the date of the Statement of Financial Condition of the Fund included
in Part A of this Prospectus, the Sponsor had deposited the underlying
Securities (described below) identified in the Portfolio in Part A with the
Trustee at prices equal to the evaluation of those Securities on the
offering side of the market as determined by the Evaluator, and the Trustee
had delivered to the Sponsor units of fractional undivided interest
("Units") in each Trust as set forth in the Statement of Financial
Condition. See "Investment Summary" and the financial statements for the
Fund in Part A of this Prospectus.
- -------------
* The summary description appearing in this Prospectus of rights of Holders
(as defined below) under the Indenture does not purport to be complete and
is qualified in its entirety by reference to the complete text of the
Indenture, which is filed with the Securities and Exchange Commission as an
exhibit to the Registration Statement under the Securities Act of 1933 of
which this Prospectus is a part.
The Sponsor intends to deposit additional Securities in each of the
Trusts, with identical maturities to those of the Securities identified in
the portfolios of such Trusts in Part A. The Securities so deposited may
be represented by purchase contracts assigned to the Trustee together with
an irrevocable letter of credit issued by a commercial bank, cash or cash
equivalents to fund their purchase. Units in the Trusts delivered to the
Sponsor in connection with subsequent deposits will be offered for sale by
means of this Prospectus.
Units are offered for sale at a price based upon the offering side
evaluation of the Securities, plus a transaction charge of 1.50% or less of
the price so determined (the "Offering Price"). The Sponsor has undertaken
to maintain a secondary market in the Units, also based upon the offering
side evaluation of the Securities (the "Sponsor's Repurchase Price"). In
addition, Holders of Units (including the Sponsor) have the right to have
their Units redeemed at a price based on the bid side evaluation of the
Securities (the "Redemption Price"). Redemptions will be made in cash or,
at the option of the Holder, in kind. See "Sale and Redemption of Units."
On the date of the Statement of Financial Condition of the Fund included
in Part A of this Prospectus, each Unit of a Trust represented the
fractional undivided interest in the Securities held in the Trust set forth
under "Investment Summary" in Part A. If Units of any Trust are redeemed,
the face amount of Securities in the Trust will be reduced by amounts
allocable to redeemed Units, and the fractional undivided interest
represented by each Unit in the balance of the Trust will be increased. If
additional Units are issued by any Trust (through deposit of Securities by
the Sponsor in connection with the sale of additional Units), the face
amount of Securities in the Trust will be increased by amounts allocable to
additional Units, and the fractional undivided interest represented by each
Unit in the balance of the Trust will be decreased. Units will remain
outstanding until redeemed upon tender to the Trustee by a Holder or until
the liquidation of the Trust pursuant to the terms of the Indenture. See
"Sale and Redemption of Units" and "Administration of the Fund."
As used herein, "Securities" includes "Stripped Treasury Securities"
(see "Characteristics of the Securities" below), interest-bearing Treasury
securities ("Treasury Notes"), and Stripped Treasury Securities and
Treasury Notes represented by contracts to purchase such securities. The
term "Holder" refers to the Sponsor, when appropriate, and to The Guardian
Separate Account B (the "Account") established by The Guardian Insurance &
Annuity Company, Inc. ("GIAC"), which is currently the only eligible
purchaser of Units from the Sponsor. The Account invests in Units to fund
benefits under variable life insurance policies issued by GIAC (the
"Policies") in accordance with allocation instructions received from
purchasers of Policies. For further information as to the rights of Policy
owners, which should be distinguished from the rights of Holders as set
forth in this Prospectus, see the accompanying Prospectus relating to the
Policies.
Risk Factors
An investment in Units of the Trust should be made with an understanding
of the risks that such an investment may entail, including the risk that
the value of the Trusts portfolio and hence of the Units will decline with
increases in interest rates. High inflation and recession, together with
the fiscal and monetary measures adopted to attempt to deal with these and
other economic problems, have contributed to wide fluctuations in interest
rates and thus in the value of fixed-rate debt obligations generally in
recent years. The Sponsor cannot predict future economic policies or
their consequences or, therefore, the course or extent of any similar
fluctuations in the future. Moreover, because interest on "zero coupon"
obligations, to which Stripped Treasury Securities are economically
similar (see "Characteristics of the Securities" below), is not
distributed on a current basis but is in effect compounded, the value of
securities of this type (and of a portfolio primarily comprised of such
obligations) is subject to greater fluctuations in response to changing
interest rates than the value of debt obligations which distribute income
regularly. Accordingly, while the full faith and credit of the United
States Government protects against credit risks on the Securities in each
Trust, disposition of Units before the maturity of the underlying
portfolio Securities at a time when interest rates have increased will
involve greater market risk than disposition of interests in a trust
holding interest-bearing debt obligations. This risk is greater when the
period to maturity is longer. In addition, a direct Holder will recognize
significant amounts of taxable income before the receipt of the cash
attributable to such income.
Characteristics of the Securities
Each Trust consists primarily of Stripped Treasury Securities with
maturities corresponding to that Trusts designation. Each Trust also holds
Treasury Notes which are deposited in order to provide income with which to
pay anticipated expenses of the Trust. It is anticipated that a constant
proportion of Treasury Notes to Stripped Treasury Securities will be
maintained in each of the Trusts. All of the Securities represent direct
obligations of the United States Government which are payable in full at
maturity at their stated maturity amount. The Securities in each Trust are
not subject to redemption prior to maturity and do not have any equity or
conversion features.
Stripped Treasury Securities held by any Trust will consist of one or
more of the following types of securities: (i) United States Treasury debt
obligations which have been stripped of their unmatured interest coupons,
(ii) coupons which have been stripped from United States Treasury bonds,
and (iii) receipts or certificates for stripped United States Treasury
debt obligations and stripped coupons. Stripped debt obligations are
bonds originally issued as coupon bonds which have been stripped of their
unmatured interest coupons subsequent to issuance by the owner; stripped
coupons are coupons that were originally issued as part of and attached to
coupon bonds and have subsequently been stripped from those bonds by their
owner. Stripped debt obligations and coupons (other than when represented
by receipts or certificates as described below) are eligible for purchase
by the Trusts only if held in the book-entry system maintained by the
Federal Reserve pursuant to the United States Treasurys Separate Trading
of Registered Interest and Principal of Securities program. Receipts or
certificates for stripped United States Treasury debt obligations and
coupons evidence ownership of future interest or principal payments on
such obligations and coupons. Such receipts have been offered for sale by
several investment banking firms, are traded in a secondary market, and
currently represent a large segment of the market for Stripped Treasury
Securities. As described in the offering circulars through which the
receipts are offered for sale, the completeness and correctness of which
are assumed here, the receipt sales programs of the several firms are not
identical but are similar to one another. The receipts or certificates
are typically issued by a major bank which acts as custodian and nominal
holder of the underlying stripped United States Treasury obligations
(which may be held by such bank either in physical or in book-entry form).
The terms of custody generally provide that the underlying obligations
will be held separate from the general assets of the custodian and will
not be subject to any right, charge, security interest, lien or claim of
any kind in favor of the custodian or any person claiming through the
custodian, that the custodian will be responsible for applying all
payments received on those underlying obligations to the related receipts
or certificates without making any deductions other than applicable tax
withholding, and that the custodian is required to maintain insurance for
the protection of holders of receipts or certificates in customary amounts
against losses resulting from the custody arrangement due to dishonest or
fraudulent action by the custodians employees. The offering circulars for
such receipts and certificates generally provide that the holders of
receipts or certificates, as the real parties in interest, are entitled to
the rights and privileges accorded to holders of the underlying stripped
debt obligations and coupons, including the right in the event of default
in payment of principal or interest thereon to proceed individually
against the United States without acting in concert with other holders of
those receipts or certificates or the custodian.
Stripped Treasury Securities are sold at a deep discount because the buyer
of those securities receives only the right to a future fixed payment on
the security and does not receive any rights to periodic interest payments.
Purchasers of Stripped Treasury Securities acquire, in effect, discount
obligations that are substantially similar economically to the "zero
coupon" bonds issued by corporations, which are originally issued at a deep
discount and do not make any periodic payments of interest prior to
maturity.
Yield
The economic effect of purchasing Units of a Trust is that the investor
who holds such Units until maturity of the underlying Securities should
receive, assuming, among other things, that the income generated by the
Treasury Notes held by such Trust equals expenses incurred, a fixed yield
that can be estimated at the time of purchase, not only on his original
investment but also on all amortized discount during the life of the
underlying Securities. Accordingly, an investor in the Trusts, unlike an
investor in funds comprised of securities making periodic distributions,
virtually eliminates the risk of being unable to invest distributions at a
rate as high as the anticipated yield on Trust Units, but will forego the
ability to reinvest such yield at higher rates in the future. The assumed
or implicit automatic reinvestment of the portion of the yield represented
by amortized discount differentiates the Trusts from funds comprised of
securities on which periodic interest is paid. Actual yield realized by
an investor who holds Units until maturity of the underlying Securities,
however, may be more or less than the yield estimated at the time of
purchase of such Units as a result of changes in the expenses incurred by
a Trust or sales of Securities held by a Trust prior to maturity in order
to meet redemptions of Units. See "Sale and Redemption of Units",
"Expenses and Charges" and "Administration of the Fund Q Accounts and
Distributions."
A Holder will be required to include annually in gross income an
allocable portion of the discount on the Stripped Treasury Securities
before the receipt of the cash attributable to such income. For Federal
income tax purposes, inclusion will be on a basis that reflects the
effective semi-annual compounding of accrued but unpaid interest
represented by amortization of the discount on the Stripped Treasury
Securities. See "Taxes."
SALE AND REDEMPTION OF UNITS
Pricing of Units
The price per Unit of a Trust (the "Price per Unit") is computed as
follows. The sum of (i) taxes or other governmental charges against the
Trust not previously deducted, (ii) accrued fees and expenses of the
Trustee (including legal and auditing expenses), the Evaluator and counsel,
and certain other expenses, and (iii) any cash held for distribution to
Holders of record as of a date prior to the evaluation is subtracted from
the sum of (a) the aggregate evaluation of the Trust's portfolio Securities
determined by the Evaluator, (b) cash on hand in the Trust (other than cash
deposited by the Sponsor for the purchase of Securities), (c) accrued and
unpaid interest on the Treasury Notes as of the date of computation (except
for interest payable to the Sponsor as a special distribution, as explained
below) and (d) all other assets of the Trust. The resulting difference is
divided by the number of Units outstanding to arrive at the Price per Unit
for the Trust with respect to which the foregoing calculations were made.
The aggregate evaluation of each Trust's portfolio Securities is
determined by the Evaluator on the basis of current prices for the
Securities, if available; current prices for comparable securities; the
value of the Securities as determined by appraisal; or any combination of
the foregoing. The Evaluator may obtain current price information as to
the Securities from investment dealers or brokers (including the Sponsor)
that customarily deal in those types of securities.
The Price per Unit on the offering side of the market used to determine
the Offering Price and Sponsors Repurchase Price is computed as of the
Evaluation Time on each Business Day, effective for all such transactions
since the immediately preceding Evaluation Time. See "Sale of Units" and
"Market for Units" below. The Price per Unit on the bid side of the market
used to determine the Redemption Price is computed as of the Evaluation
Time next following the tender by a Holder of its Units for redemption,
effective for all redemptions since the immediately preceding Evaluation
Time. See "Redemption of Units" below. In addition, the Price per Unit on
the offering side and the bid side of the market is determined (i) on June
30 and December 31 of each year (or on the last Business Day prior to such
dates) and (ii) on any Business Day on which such a determination is
requested by the Trustee or the Sponsor.
As indicated under "Investment Summary" in Part A of this Prospectus,
the Stripped Treasury Securities and Treasury Notes deposited in each Trust
include elements of amortized discount and accrued interest, respectively.
Evaluations of Securities in a Trust include discount amortized on the
Stripped Treasury Securities from the date of purchase or sale of Units of
the Trust to the date of settlement for such Units (normally five Business
Days). Interest on the Treasury Notes accruing prior to their deposit in a
Trust and after such deposit to the date five Business Days after such
deposit is paid to the Sponsor by the Trustee as a special distribution and
recovered by the Trustee from interest received on the Treasury Notes, and
is therefore not included in the evaluation of Securities in the Trust.
See "Investment Summary" in Part A of this Prospectus.
In addition to the deposit by it of contracts representing Securities
expected to settle within the usual settlement time for sales of securities
(normally five Business Days), the Sponsor may deposit contracts
representing Securities with an agreed-upon delayed settlement date which
will not be delivered to the Sponsor (or to the Trust) by the settlement
date for Units acquired by the Sponsor on its deposit of such contracts.
Amortized discount on such Securities will not accrete to the benefit of
the Trust holding the contract representing the Securities until the
settlement date for such Securities.
The Price per Unit of a Trust will vary in accordance with fluctuations
in the evaluation of the underlying Securities. Amortization of discount will
have the effect of increasing at any particular time the value of the
underlying Securities.
As used in this Prospectus, the term "Business Day" means every Monday
through Friday except for New Year's Day, Martin Luther King's Birthday,
President's Day, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veteran's Day, Thanksgiving and Christmas.
Sale of Units
The Offering Price per Unit of a Trust is determined by evaluating the
Trusts portfolio Securities on the offering side of the market in
determining the Price per Unit (see "Pricing of Units") and adding the
applicable transaction charge. The transaction charge varies with the
remaining years to maturity of the Stripped Treasury Securities in the
Trust, as follows:
Percent of Percent of
Offering Net Amount
Remaining Years to Maturity Price Invested
--------------------------- ---------- ----------
Less than 3 years .5% .503%
At least 3 years but less than 8 years 1.00 1.010
At least 8 years but less than 13 years 1.50 1.523
The transaction charges set forth above, which do not reflect
distribution expenses because all sales are currently made to the Account,
are less than sales charges on comparable unit investment trusts offered to
the public by the Sponsor. On Units sold to the Account, GIAC initially
pays the transaction charge. GIAC has represented that it intends to
recover any transaction charges paid by it from the Investment Division
within the Account corresponding to the Trust with respect to which the
transaction charge was paid through a charge against the assets of such
Division. Reference should be made to the accompanying Prospectus relating
to the Policies for further information.
Market For Units
The Sponsor has undertaken to maintain a secondary market for Units of
each Trust and to offer continuously to purchase Units of each Trust at the
Sponsors Repurchase Price. The Sponsors Repurchase Price per Unit of a
Trust is determined by evaluating the Trust's portfolio Securities on the
offering side of the market in determining the Price per Unit (see "Pricing
of Units").
The right of Holders to resell their Units to the Sponsor may be
suspended and payment postponed for any period during which the right of
redemption with respect to such Units has been suspended. See "Redemption
of Units" below.
Consolidated financial statements of the Sponsor are incorporated by
reference in this Prospectus. See "Financial Information Concerning the
Sponsor" in Part A of this Prospectus.
Redemption of Units
In addition to the right of a Holder to sell Units to the Sponsor at the
Sponsors Repurchase Price, a Holder (including the Sponsor) is also
entitled to redeem Units at the office of the Trustee upon tender of
certificates, if issued, and payment of any relevant tax without any other
fee. The Redemption Price per Unit of a Trust is determined by evaluating
the Trusts portfolio Securities on the bid side of the market in
determining the Price per Unit (see "Pricing of Units").
Because the Sponsors Repurchase Price is based on the offering side
evaluation of the Securities in a Trust and the Redemption Price is based
on the bid side evaluation of such Securities, it is expected that it will
always be to the advantage of a Holder (other than the Sponsor) to resell
Units to the Sponsor rather than to redeem them. Unless the Account has
elected an in kind payment, the Sponsor therefore expects to repurchase any
Units tendered for redemption by the Account.
The Sponsor, as a Holder, intends to redeem Units it has purchased in
the secondary market or acquired on deposit of Securities in a Trust if it
determines it is undesirable to continue to hold those Units in its
inventory. Factors which the Sponsor will consider in making such a
determination will include the number of Units of all Trusts which it has
in its inventory, the salability of the Units, and its estimate of the time
required to sell the Units and general market conditions. The Sponsor has
committed to redeem Units only in an amount substantially equal to the
value of one or more portfolio Securities, so that uninvested cash
generated by a redemption is de minimis.
Certificates to be redeemed must be properly endorsed or accompanied by
a written instrument or instruments of transfer. The Trustee will redeem
Units either in cash or, if specified at the option of the Holder, in kind
as requested in writing to the Trustee. A Holder will be entitled to
receive redemption proceeds within seven calendar days following tender or,
if the seventh calendar day is not a Business Day, on the last Business Day
prior thereto.
In kind distributions will take the form of distributions of certificates
representing whole Securities and cash representing fractional interests in
such Securities. The Securities to be received by a Holder upon redemption
of its Units in kind will be selected by the Trustee from a list supplied
by the Sponsor. The Trustee is empowered to sell Securities in order to
make funds available for cash distributions and for in kind distributions
to the extent necessary to redeem fractional interests in whole Securities
represented by Units redeemed. To the extent that Securities are redeemed
in kind or sold, the size of the relevant Trust will be reduced. Sales may
be required at a time when Securities would not otherwise be sold and may
result in lower prices than might otherwise be realized. In addition,
because the Sponsor may specify minimum face amounts in which Securities
may be sold, the proceeds of sale may exceed the amount required to redeem
Units. Any excess proceeds will be distributed to Holders upon maturity of
the Securities in the relevant Trust.
The right of Holders to redeem their Units may be suspended and payment
postponed for any period (i) during which the New York Stock Exchange (the
"NYSE") is closed other than for customary weekend and holiday closings, or
(ii) during which, as determined by the Securities and Exchange Commission
(the "Commission"), (a) trading on the NYSE is restricted or (b) an
emergency exists as a result of which disposal or evaluation of the
Securities is not reasonably practicable, or (iii) for any other periods
which the Commission may by order permit.
Comparison of Offering Price, Sponsors Repurchase Price and Redemption Price
With respect to each Trust, on the date of the Statement of Financial
Condition of the Fund included in Part A of this Prospectus, the Offering
Price per Unit (which includes the transaction charge) and the Sponsors
Repurchase Price per Unit (each based on the offering side evaluation of
Securities in a Trust) exceeded the Redemption Price per Unit (based on the
bid side evaluation thereof) by the amounts set forth under "Investment
Summary" in Part A.
On the date of the Statement of Financial Condition of the Fund included
in Part A, the bid prices for Securities in each of the Trusts were lower
than the offering prices thereof (see Portfolio of the Fund in Part A).
For this and other reasons (including fluctuations in the market prices of
the Securities and the fact that the Offering Price includes a transaction
charge), the amount realized by a Holder upon any sale or redemption of
Units may be less than the price paid for such Units.
TAXES
The following discussion relates only to Holders (the Account and the
Sponsor) of Units of the Fund, and not to Policy owners. For information
on tax consequences to Policy owners, see the attached Prospectus relating
to the Policies.
In the opinion of Davis Polk & Wardwell, special counsel for the Sponsor,
under existing law:
Each Trust is not an association taxable as a corporation for
Federal income tax purposes, and income received by the Trust will be
treated as the income of the Holders of the Trust in the manner set forth
below.
Each Holder will be considered the owner of a pro rata portion of each
Security in its Trust under the grantor trust rules of Sections 671-679 of
the Internal Revenue Code of 1986, as amended. In order to determine the
face amount of a Holder's pro rata portion of each Security in its Trust on
the date of the Statement of Financial Condition of the Fund included in
Part A of this Prospectus, see "Face Amount of Securities" under the
Investment Summary in Part A. The total cost to a Holder for its Units,
including transaction charges, is allocated among its pro rata portion of
each Security in its Trust (in proportion to the fair market values thereof
on the date the Holder purchases its Units) in order to determine its tax
cost for its pro rata portion of each Security. In order for a Holder who
purchased its Units on the date of the Statement of Financial Condition of
the Fund included in Part A of this Prospectus to determine the fair market
value of its pro rata portion of each Security in its Trust on such date,
see Sponsors Repurchase Price under the Investment Summary in Part A.
Each Trust consists primarily of Stripped Treasury Securities. A Holder
is required to treat its pro rata portion of each Stripped Treasury
Security in its Trust as a bond that was originally issued on the date the
Holder purchased its Units at an original issue discount equal to the
excess of the stated redemption price at maturity over the Holder's tax cost
therefor as discussed above, and to include annually in income a portion of
such original issue discount determined under a formula which takes into
account the semi-annual compounding of interest.
Each Holder will be considered to have received the income on its pro
rate portion of the Treasury Notes in its Trust when interest on the Notes is
received by its Trust. A Holder who itemizes deductions will be entitled
to deductions for income tax purposes of the Holder's pro rata share of
expenses paid by its Trust, including fees of the Trustee and the
Evaluator.
A Holder will recognize taxable gain or loss when all or part of his pro
rata portion of a Security is disposed of by the Fund for an amount
greater or less than his adjusted tax basis. Any such taxable gain or
loss will be capital gain or loss except that any gain from the
disposition of a Holders pro rata portion of a Security acquired by the
Holder at a "market discount" (i.e., if the Holder's original cost for his
pro rata portion of the Security (plus any original issue discount which
will accrue thereon) is less than its stated redemption price at maturity)
will be treated as ordinary income to the extent the gain does not exceed
the accrued market discount. Capital gains are generally taxed at the
same rate as ordinary income. However, the excess of net long-term
capital gains over net short-term capital losses may be taxed at a lower
rate than ordinary income for certain noncorporate taxpayers. A capital
gain or loss is long-term if the asset is held for more than one year and
short-term if held for one year or less. The deduction of capital losses
is subject to limitations. A Holder will also be considered to have
disposed of all or part of his pro rata portion of each Security when he
sells or redeems all or some of his Units.
Holders will be required for Federal income tax purposes to include
amounts in ordinary gross income in advance of the receipt of the cash
attributable to such income. Therefore, direct purchase of Units may be
appropriate only for a tax-deferred account which is not subject to a
current tax on income accrued in advance of the receipt of the cash
attributable to such income.
Under the income tax laws of the State and City of New York, each Trust
is not an association taxable as a corporation and income received by the
Trust will be treated as the income of the Holders of the Trust in the same
manner as for Federal income tax purposes.
The foregoing discussion relates only to Federal and New York State and
City income taxes. Holders also may be subject to state and local taxation
in other jurisdictions. Holders should consult their own tax advisers
regarding specific questions as to Federal, state or local taxes.
SPONSORS PROFITS
The Sponsor receives a transaction charge at the rates set forth under
"Sale and Redemption of Units Q Sale of Units" on any sale by it of Units,
regardless of whether such Units were acquired by the Sponsor on the
deposit of Securities in a Trust or in the secondary market maintained by
it. In addition, the Sponsor may realize a profit on the deposit of
Securities in a Trust based upon the difference between the cost of the
Securities to the Trust (which is based on the offering side evaluation of
the Securities) and the price paid by the Sponsor for such Securities. The
Sponsor also may realize profits or sustain losses as a result of
fluctuations in the aggregate value of a Trusts portfolio Securities and
hence in the Offering Price for the related Units sold by the Sponsor
subsequent to the date of the acquisition by the Sponsor of such Units on
its deposit of Securities in a Trust.
In maintaining a secondary market for the Units, the Sponsor also will
realize profits or sustain losses in the amount of any difference between
the Sponsors Repurchase Price at the time of such purchase and the Offering
Price or Redemption Price at the time of resale or redemption, as the case
may be.
Cash, if any, received from purchasers of Units by the Sponsor prior to
the settlement dates for purchase of Units or prior to payment for
Securities upon their delivery may be used in the Sponsor's business,
subject to the limitations of Rule 15c3-3 under the Securities Exchange Act
of 1934, and may be of benefit to the Sponsor.
EXPENSES AND CHARGES
Initial Expenses
The Sponsor has borne all expenses incurred in creating and establishing
the Fund, including the cost of the initial preparation of the Indenture,
the initial fees and expenses of the Trustee, legal and auditing expenses
and other out-of-pocket expenses.
Sponsor's Fees
The Sponsor receives no fee from the Fund for its services as such.
However, while the transaction charges paid by GIAC to the Sponsor are not
directly charged to the Account, GIAC has represented that it will recover
such transaction charges through charges against the assets of the Division
of the Account corresponding to the Trust with respect to which the
transaction charge was paid. Policy owners therefore will indirectly bear
these charges. Reference should be made to the accompanying Prospectus
relating to the Policies for further information.
Trustee's and Evaluator's Fees
The Trustee's and Evaluator's fees are set forth under "Investment
Summary" in Part A of this Prospectus. The Trustee's fees, payable
semi-annually out of the assets of each Trust, are determined monthly based
on the largest face amount of Securities in a Trust during the preceding
month. The Trustee also may benefit to the extent that it holds funds on
deposit in the various non-interest bearing accounts created under the
Indenture. See "Administration of the Fund Q Accounts and Distributions."
The Evaluator's fees set forth under "Investment Summary" in Part A for
each determination of the Offering Price and Sponsor's Repurchase Price will
be paid by the Sponsor. The Evaluator's fees for determining the Redemption
Price will be borne by the Trust.
Charges Borne by the Trusts
In addition to the Trustee's and Evaluator's fees borne by the Trusts
identified above, charges borne by the Trusts include: (i) fees of the
Trustee for extraordinary services, (ii) certain expenses of the Trustee
(including legal and auditing expenses) and of counsel designated by the
Sponsor, (iii) various governmental charges, (iv) expenses and costs of any
action taken to protect a Trust, (v) indemnification of the Sponsor and the
Trustee for any loss, liability and expense incurred without gross
negligence, bad faith, wilful misconduct or reckless disregard of their
duties and (vi) to the extent then lawful, expenses (including, but not
limited to, legal, auditing and printing expenses) of maintaining
registration or qualification of the Units and/or the Fund under Federal or
state securities laws subsequent to initial registration.
The above fees and expenses, including the Trustee's and Evaluator's
fees, are deducted from the Income Account of each Trust in any month in
which interest is paid on the Treasury Notes in such Trust and, to the extent
funds are not then available in the Income Account, from the Capital
Account of the Trust to which they relate. To the extent funds are not
available in the Capital Account, the Trustee is empowered to sell
Securities in the Trust in order to make funds available to pay such
amounts. The above fees, expenses and advances, when paid by or owing to
the Trustee, are secured by a lien on the assets of the relevant Trust.
ADMINISTRATION OF THE FUND
Records
The Trustee keeps records of transactions of the Fund, including a
current list of the Securities held in each Trust and a copy of the
Indenture. These records are available to Holders for inspection at the
office of the Trustee at reasonable times during the Trustees business
hours.
Portfolio Supervision
In selecting Securities for deposit in the Fund, the following factors,
among others, are considered by the Sponsor: (i) the types of Securities
available; (ii) the prices of those Securities relative to other
comparable securities; (iii) the yield to maturity of those Securities;
and (iv) the maturities of those Securities.
Neither the Sponsor nor the Trustee will be liable in any way for any
default, failure or defect in any of the Securities. In the event of a
failure to deliver Securities that have been purchased for a Trust under a
contract ("Failed Securities"), the Sponsor is authorized under the
Indenture to direct the Trustee to use the funds reserved for the purchase
of Failed Securities to acquire substitute Securities with identical
maturities ("Substitute Securities"). Substitute Securities must be
purchased at a price that results in a yield to maturity as of their date
of deposit which is equivalent to the yield to maturity of the Failed
Securities. If the Sponsor does not or cannot, in accordance with the
restrictions on its ability to do so summarized above, direct the Trustee
to purchase Substitute Securities, the Sponsor will, within 30 days after
delivery to the Sponsor of notice of default on the contract, cause to be
refunded the transaction charge and cost of Securities to the Trust
attributable to Units acquired on deposit of contracts to purchase the
Failed Securities, plus accrued interest and amortization. Within five
days after the acquisition of Substitute Securities or a refund by the
Sponsor, the Trustee will notify all Holders of the affected Trust of the
acquisition of the Substitute Securities or such refund and, within 30
days thereafter, make a pro rata distribution of the amount of such refund
or the amount, if any, by which the cost to the Trust of the Failed
Securities exceeded the cost of the Substitute Securities.
In the event that it becomes necessary for the Trust to sell Securities
in order to make funds available for cash redemptions, the Securities to be
sold will be selected by the Trustee from a list supplied by the Sponsor.
Securities will be chosen for this list by the Sponsor on the basis of
market factors. Provision is made under the Indenture for the Sponsor to
specify minimum face amounts in which blocks of Securities are to be sold
in order to obtain the best price for the Trust. While these minimum
amounts may vary from time to time in accordance with market conditions,
the Sponsor believes that the minimum face amounts specified would range
from $25,000 to $100,000.
If a Holder requests in kind redemption of its Units, the Securities
received by the Holder upon redemption will also be selected by the Trustee
from a list supplied by the Sponsor.
The Sponsor may direct the disposition of Securities upon default in
payment of principal or interest which is not promptly cured, institution
of certain legal proceedings, default in payment of principal of or
interest on other securities constituting obligations of the United States
Government, or a decline in price or the occurrence of other market or
credit factors that in the opinion of the Sponsor would make the retention
of the Securities in any Trust detrimental to the interest of the Holders
of that Trust. If a default in the payment of principal or interest on any
Security occurs and if the Sponsor fails to give instructions to sell or
hold the Security within 30 days after the notification of such failure by
the Trustee to the Sponsor, the Indenture provides that the Trustee may
sell the Security.
Accounts and Distributions
The Indenture provides for the creation by the Trustee of three accounts
on behalf of each Trust of the Fund: an Income Account, a Capital Account,
and a Reserve Account. Interest received on the Treasury Notes held by
each Trust is credited to the Income Account. Proceeds from the
disposition of any Security (other than proceeds representing interest and
penalties on the Treasury Notes which are credited to the Income Account)
which are not used for redemption of Units are credited to the Capital
Account of the relevant Trust. A Reserve Account may be created by the
Trustee on behalf of each Trust in accordance with the terms of the
Indenture by withdrawals from time to time from the Income or Capital
Accounts of amounts deemed requisite by the Trustee to establish a reserve
for any taxes or other governmental charges that may be payable out of the
assets of such Trust.
Any date on which a distribution to Holders of Units is made is referred
to herein as a "Distribution Day." Because funds held by the Trustee in the
various accounts do not bear interest, and because of the "zero coupon"
nature of Stripped Treasury Securities which constitute substantially all
of the assets of the Trusts, it is anticipated that no distributions will
be made to Holders of Units until the next Business Day following the
maturity of the Securities in the Trust portfolio to which the Units
relate. Distributions will be made to Holders as of the Business Day
immediately preceding the Distribution Day (the "Record Day") by mail on
the Distribution Day and will consist of an amount equal to each Holders
pro rata share of the cash balance in the Income and Capital Accounts of a
Trust as of the close of business on the Record Day, less any accrued
expenses, fees or liabilities owed by the Trust and amounts allocated by
the Trustee to the Reserve Account.
Reports to Holders
After the end of each calendar year, the Trustee will furnish to Holders
of Units in the relevant Trust a statement (i) summarizing transactions for
the year in the Income, Capital and Reserve Accounts of the Trust, (ii)
identifying Securities sold and purchased during, and listing Securities
held at the end of, the year by the Trust, (iii) stating the Trust's
Offering Price, Sponsor's Repurchase Price and Redemption Price per Unit
based upon the computation thereof made at the end of the year and (iv)
specifying the amounts, if any, distributed during the year from the Trust's
Income and Capital Accounts.
The accounts of each Trust will be audited at least annually by
independent certified public accountants designated by the Sponsor, and the
report of such accountants will be furnished by the Trustee to Holders.
Upon distribution of the assets of a Trust as described under "Accounts and
Distributions", the Trustee will furnish to Holders as of the Record Day a
statement of the amounts of interest and other receipts being distributed,
expressed in each case as a dollar amount per Unit.
Certificates
Upon request to the Trustee and payment of postage, Holders are entitled
to a registered Certificate for Units. Certificates are transferable or
interchangeable upon presentation at the office of the Trustee, and payment
of any taxes or governmental charges imposed on the transaction, plus a
transfer charge specified by the Trustee and approved by the Sponsor.
Mutilated, destroyed, stolen or lost Certificates will be replaced upon
delivery of satisfactory indemnity and payment of expenses incurred.
Unless a Certificate is requested, Holders will hold their Units in
uncertificated form. The Trustee will credit each such Holder's account
with the number of Units purchased by that Holder. Uncertificated Units
are transferable through the same procedures applicable to Units evidenced
by Certificates, except that no Certificate need be presented to the
Trustee and none will be issued upon transfer unless requested by the
Holder.
Amendment and Liquidation
The Sponsor and Trustee may amend the Indenture without the consent of
Holders (i) to cure any ambiguity or to correct or supplement any of its
provisions which may be defective or inconsistent, (ii) to make any changes
in its provisions required by the Commission or any successor governmental
agency, or (iii) to make any other changes which do not adversely affect
the interest of the Holders, as determined in good faith by the Sponsor.
The provisions of the Indenture with respect to any Trust also may be
amended in any respect or waived by the Sponsor and Trustee with the
consent of the Holders of 51% of the Units of such Trust then outstanding.
However, none of such amendments or waivers may permit the acquisition by a
Trust of Securities with maturity dates differing from those of the
Securities described in the portfolio of such Trust in Part A of this
Prospectus or reduce the percentage of Units required to consent to such
amendments or waivers without the consent of all Holders of Units in such
Trust. The Trustee will promptly notify Holders of the substance of any
such amendment.
The Indenture will terminate in accordance with its terms upon the
earlier of the distribution of all assets of any Trust, as to the Trust
holding the assets so distributed, or the date specified under "Investment
Summary Q Mandatory Termination Date" in Part A of this Prospectus. A
Trust may be liquidated if the value of the Trust is less than the minimum
value set forth under "Investment Summary" in Part A. A Trust also may be
terminated by action of Holders of 51% of the Units in such Trust at any
time. The Trustee will deliver written notice of any proposed termination
of a Trust to each Holder within a reasonable period of time prior to its
proposed liquidation, specifying the times at which Holders may surrender
their Certificates for cancellation or otherwise receive payment for their
Units if held in uncertificated form. Within a reasonable period of time
after notice of proposed termination of a Trust, the Trustee must sell all
of the Securities then held in the Trust and distribute to each Holder the
Holder's interest in the Income and Capital Accounts after deduction of
accrued expenses, fees or liabilities owed by the Trust and any amounts
allocated by the Trustee to the Reserve Account. Such distribution
normally will be made by mailing a check to the address of the Holder
appearing on the record books of the Trustee on the Record Day prior to the
Distribution Day on which such checks are mailed.
SPONSOR
The Sponsor, a Delaware corporation which is an indirect wholly owned
subsidiary of The Travelers Inc., is engaged in the underwriting,
securities and commodities brokerage, and investment advisory business,
and is a member of the NYSE, other major securities exchanges and
commodity exchanges, and the National Association of Securities Dealers,
Inc. In July, 1993, Primerica Corporation ("Primerica") and its
subsidiary, Smith Barney, Harris Upham & Co. Incorporated, acquired the
domestic retail brokerage and asset management businesses of Shearson
Lehman Brothers Inc., previously the sponsor of the Fund. As a result of
this acquisition, Smith Barney Shearson Inc. is now the Sponsor of the
Fund. In January, 1994, Primerica completed a merger with The Travelers
Corporation and they became The Travelers Inc. The Sponsor has acted as
principal underwriter and managing underwriter of other investment
companies. The Sponsor, in addition to participating as a member of
various selling groups or as an agent of other investment companies,
executes orders on behalf of investment companies for the purchase and
sale of securities of such companies and sells securities to such
companies in its capacity as a broker or dealer in securities.
Limitations on Liability
The Sponsor will not be liable to the Fund or to Holders for taking any
action or refraining from taking any action in good faith or for errors in
judgment and will not be responsible for depreciation or loss with respect
to the Securities held by the Fund, except in cases of wilful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations under
the Indenture. The acquisition of all or substantially all of the assets
of the Sponsor and the assumption of its obligations under the Indenture by
a corporation or partnership which carries on its business will relieve the
Sponsor of its obligations and duties under the Indenture.
Resignation and Removal
If the Sponsor fails to perform its duties, becomes incapable of acting
or becomes bankrupt or its affairs are taken over by public authorities, the
Trustee may (i) appoint a successor Sponsor at rates of compensation not
exceeding any maximum prescribed by the Commission and in an amount deemed
reasonable by the Trustee, (ii) liquidate the Fund and distribute the
proceeds of the sale of Securities held in the Fund as provided under
"Administration of the Fund Q Amendment and Liquidation" or (iii) continue
to act as Trustee in accordance with the Indenture.
TRUSTEE
The Trustee is The Bank of New York, a New York corporation authorized to
do a banking business with its corporate trust office at 101 Barclay
Street, New York, New York, which is subject to supervision 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.
Limitations on Liability
The Trustee will not be liable to the Fund or to Holders of Units for
taking any action or refraining from taking any action in good faith or for
errors in judgment and will not be responsible for depreciation or loss
with respect to the purchase or sale of or the failure to sell any
Securities held by the Fund, nor will the Trustee be personally liable for
any taxes or other governmental charges imposed on the Fund or the
Securities. The Trustee will not be liable for any action taken in good
faith in reliance on prima facie properly executed documents. However, the
foregoing limitations (and other exculpatory provisions in the Indenture
relating to the Trustee) will not protect the Trustee in cases of wilful
misfeasance, bad faith, gross negligence, or reckless disregard of its
duties and obligations under the Indenture.
Resignation and Removal
The Trustee or any successor may resign upon notice to the Sponsor and
may be removed upon the direction of the Holders of 51% of the Units at any
time. The Trustee may also be removed by the Sponsor without the consent
of Holders if it becomes incapable of acting, becomes bankrupt or its
affairs are taken over by public authorities. In case of such resignation
or removal, the Sponsor will use its best efforts to appoint a successor
promptly. If no successor Trustee is appointed within thirty days after
notification by or to the Trustee of its resignation or removal, the
Trustee may apply to a court for the appointment of a successor.
Resignation or removal of the Trustee will become effective upon
appointment of a successor Trustee.
EVALUATOR
The Evaluator is Kenny S&P Evaluation Services, a division of Kenny
Information Systems, Inc., with main offices located at 65 Broadway, New
York, New York 10006. Kenny Information Systems, Inc. is a wholly owned
subsidiary of J.J. Kenny Co., Inc. which is a wholly owned subsidiary of
McGraw-Hill, Inc.
Limitations on Liability
The Trustee and the Sponsor may rely on any evaluation furnished by the
Evaluator and will have no responsibility to Holders for its accuracy.
Determinations by the Evaluator under the Indenture will be made in good
faith upon the basis of the best information available to it. The
Evaluator will not be liable to the Trustee, the Sponsor or the Holders for
errors in judgment except in cases of wilful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties.
Resignation and Removal
The Evaluator may resign upon notice to the Sponsor and Trustee, and may
be removed at any time by the Sponsor. Upon such resignation or removal,
the Sponsor will use its best efforts to appoint a successor promptly. If
no successor Evaluator has accepted appointment within thirty days after
notification of resignation or removal, the Evaluator may apply to a court
for the appointment of a successor. Resignation or removal of the
Evaluator will become effective upon appointment of a successor Evaluator.
LEGAL OPINION
The legality of the Units offered hereby has been passed upon for the
Sponsor by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York
10017. Emmet, Marvin & Martin, 120 Broadway, New York, New York 10271,
acts as counsel for the Trustee.
INDEPENDENT ACCOUNTANTS
The Statement of Financial Condition, including the Portfolio, and the
Statements of Operations and Changes in Net Assets of the Fund set forth in
Part A of this Prospectus have been audited by Coopers & Lybrand,
independent accountants, to the extent indicated in their report thereon
also included. Such financial statements have been included herein in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
Parts A and B of this Prospectus do not contain all of the information
with respect to the Fund set forth in its registration statements and
exhibits relating thereto which have been filed with the Securities and
Exchange Commission, Washington, D.C. under the Securities Act of 1933 and
the Investment Company Act of 1940, and to which reference is hereby made.
The Smith Barney Shearson Fund of Stripped ("Zero") U.S. Treasury
Securities, Series A
Index to Parts A and B
Page
----
Investment Summary .............................................. A-2
Report of Independent Accountants ............................... A-5
Statement of Financial Condition ................................ A-6
Statements of Operations and Changes in Net Assets ............. A-7
Notes to Financial Statements ................................... A-8
Portfolio ....................................................... A-9
Description of the Fund ......................................... B-1
Sale and Redemption of Units .................................... B-4
Taxes ........................................................... B-7
Sponsor's Profits ............................................... B-8
Expenses and Charges ............................................ B-8
Administration of the Fund ...................................... B-9
Sponsor ......................................................... B-12
Trustee ......................................................... B-12
Evaluator ....................................................... B-13
Legal Opinion ................................................... B-13
Independent Accountants ......................................... B-13
No person is authorized to give any information or to make any
representations with respect to the Fund not contained in Parts A and B of
this Prospectus; and any information or representation not contained herein
must not be relied upon as having been authorized. Parts A and B of this
Prospectus do not constitute an offer to sell, or a solicitation of an
offer to buy, securities in any state to any person to whom it is not
lawful to make such offer in such state.
THE SMITH BARNEY
SHEARSON FUND OF
STRIPPED ("ZERO")
U.S. TREASURY
SECURITIES, SERIES A
(A UNIT INVESTMENT TRUST)
PROSPECTUS
April 29, 1994
Sponsor: Trustee:
Smith Barney Shearson Inc. The Bank of New York
Two World Trade Center 101 Barclay Street
New York, N.Y. 10048 New York, N.Y. 10286
Evaluator: Independent Accountants:
Kenny S&P Evaulation Services Coopers & Lybrand
65 Broadway 1301 Avenue of the Americas
New York, N.Y. 10006 New York, N.Y. 10019
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