THE SMITH BARNEY SHEARSON
STRIPPED ("ZERO COUPON")
U.S. TREASURY SECURITIES
FUND, SERIES A
April 29, 1994
Prospectus--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, Financial Statements
of each Trust and a summary of each Trust's portfolio. Part B contains a
general summary of the Fund. Part A may not be distributed unless accompanied
by Part B.
The Smith Barney Shearson Stripped ("Zero Coupon") U.S. Treasury
Securities Fund (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 originally consisted 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 percent 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").
Separate investment accounts (the "Accounts") of IDS Life Insurance
Company ("IDS Life") and IDS Life Insurance Company of New York ("IDS Life of
New York") are currently the only eligible purchasers of Units of each Trust
from the Sponsor. The Accounts invest in Units of the Trusts to fund benefits
under Variable Life Insurance Policies issued by IDS Life and IDS Life of New
York (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 Accounts 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 NOR 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
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 $4,487,880 $19,176,400
Number of units 4,487,880 19,176,400
Fractional undivided interest in
trust represented by each unit 1/4,487,880 1/19,176,400
Offering price per 1,000 units*
Aggregate offering side evaluation of
securities in trust** $4,163,263 $9,904,496
========== ==========
Divided by number of units times 1,000 $ 927.668 $ 516.494
Plus the applicable transaction charge*** 4.666 7.867
---------- ----------
Offering price per 1,000 units* $ 932.334+ $ 524.361+
========== ==========
Sponsor's 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 Notes 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
Trustee's monthly fee
Per $1,000 face amount of underlying securities
(see "Expenses and Charges" in Part B) $.025 $.025
Evaluator's fee for each evaluation: $5.00
Evaluation time: 3:00 P.M., New York Time,
on each Business Day
Mandatory termination date: January 1, 2036
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.
**These figures include amortization of discount on the Stripped Treasury
Securities accreting to the expected date of settlement (normally five
Business Days 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--Pricing of Units" in Part B.
***The transaction charges currently applicable to the 1995 Trust and the
2004 Trust are 0.5% and 1.50% of their respective Offering Prices per 1,000
Units (0.503% 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--Sale of Units" in Part B. On
August 4, 1986, an 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 $9.483 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 any 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--Pricing of Units" in Part B.
DESCRIPTION OF THE FUND
Structure and Offering
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 Treasury Securities 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--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--Accounts and
Distributions" in Part B.
Currently, Units are sold only to the Accounts to measure benefits under
Policies issued by IDS Life and IDS Life of New York. The interest of a
Policy owner (an "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 purchase of a
Policy. That Prospectus describes the relationship between increases or
decreases in the net asset value of Units and the benefits provided under a
Policy. The rights described in this Prospectus of the Accounts and the
Sponsor (insofar as it holds Units) as holders of Units should be
distinguished from the rights of an Owner set forth in the Prospectus
describing the Policies. For purposes of this Prospectus, the term "Holder"
shall refer to the Accounts or, when appropriate, the Sponsor. IDS Life and
IDS Life of New York 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 changes in interest rates and other factors. Moreover, the
value of "zero coupon" obligations, 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-- 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
will cause the Stripped Treasury Securities to be purchased by each Trust at
a deep discount. See "Description of the Fund--Characteristics of the
Securities" in Part B. Each Trust will also consist 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--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 Stripped ("Zero Coupon")
U.S. Treasury Securities Fund, Series A:
We have audited the statements of financial condition of THE SMITH
BARNEY SHEARSON STRIPPED ("ZERO COUPON") U.S. TREASURY SECURITIES FUND, SERIES
A, formerly The Shearson Lehman Brothers Stripped ("Zero Coupon") U.S.
Treasury Securities Fund, Series A (comprising the 1995 Trust and the 2004
Trust), including the related portfolios, as of December 31, 1993 and 1992,
and the related statements of operations and changes in net assets, and
supplemental information for the three years ended December 31, 1993, 1992 and
1991. 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 and supplemental information based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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 Stripped ("Zero Coupon") U.S. Treasury
Securities Fund, Series A at December 31, 1993 and 1992, and the results of
its operations, the changes in its net assets and supplemental information for
the years ended December 31, 1993, 1992 and 1991, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND
New York, New York
March 7, 1994
THE SMITH BARNEY SHEARSON STRIPPED ("ZERO COUPON")
U.S. TREASURY SECURITIES FUND, SERIES A
STATEMENTS OF FINANCIAL CONDITION
as of December 31, 1993 and 1992
1995 Trust 2004 Trust
---------------------- ----------------------
1993 1992 1993 1992
---------- ---------- ---------- ----------
TRUST PROPERTY:
Investment in securities at
value (amortized costs for
1993 and 1992, respectively:
$3,887,609 and $3,142,995 in
1995 Trust and $7,974,619 and
$6,618,161 in 2004 Trust) $4,161,017 $3,451,870 $9,873,506 $7,658,908
Subscriptions receivable 86,461
Net other assets (liabilities) (960) (254) 10,190 8,458
---------- ---------- ---------- ----------
$4,160,057 $3,538,077 $9,883,696 $7,667,366
========== ========== ========== ==========
Interest of holders (for 1993
and 1992, respectively:
4,487,880 and 4,086,280 units
in 1995 Trust and 19,176,400
and 18,122,200 units in 2004
Trust of fractional undivided
interest outstanding):
Cost of Trust units, net of
gross transaction charges $2,877,579 $2,474,693 $6,093,191 $5,143,722
Unrealized appreciation of
investments 273,408 308,875 1,898,887 1,040,747
Undistributed net investment
income 1,009,070 754,509 1,891,618 1,482,897
---------- ---------- ---------- ----------
Net assets $4,160,057 $3,538,077 $9,883,696 $7,667,366
========== ========== ========== ==========
Net asset value per unit $.9270 $.8658 $.5154 $.4231
====== ====== ====== ======
See accompanying notes.
THE SMITH BARNEY SHEARSON STRIPPED ("ZERO COUPON")
U.S. TREASURY SECURITIES FUND, SERIES A
STATEMENTS 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>
Operations: <C> <C> <C> <C> <C> <C>
Interest income $ 287,639 $ 280,162 $ 271,376 $ 598,518 $ 515,487 $ 416,200
---------- ---------- ---------- ---------- ---------- ----------
Expenses:
Trustee fees 1,546 1,358 1,383 5,617 5,097 4,523
Other 1,162 1,522 1,411 1,162 1,522 1,405
---------- ---------- ---------- ---------- ---------- ----------
Total expenses 2,708 2,880 2,794 6,779 6,619 5,928
---------- ---------- ---------- ---------- ---------- ----------
Net investment income 284,931 277,282 268,582 591,739 508,868 410,272
Realized gain (loss) on sale of
securities 8,930 91,894 695 171,987 52,204 (3,474)
(Decrease) increase in unrealized
appreciation (35,467) (93,208) 240,959 858,140 99,807 623,389
---------- ---------- ---------- ---------- ---------- ----------
Net increase in net assets from
operations 258,394 275,968 510,236 1,621,866 660,879 1,030,187
---------- ---------- ---------- ---------- ---------- ----------
Capital share transactions:
Proceeds from sales of units 454,652 643,293 1,223,985 1,194,819 772,122
Redemption of units:
Principal (51,766) (587,768) (102,851) (274,516) (295,940) (212,457)
Net investment income (30,370) (280,365) (43,871) (183,018) (147,631) (95,971)
Realized (gains) losses (8,930) (91,894) (695) (171,987) (52,204) 3,474
---------- ---------- ---------- ---------- ---------- ----------
363,586 (316,734) (147,417) 594,464 699,044 467,168
---------- ---------- ---------- ---------- ---------- ----------
Increase (decrease) in net assets 621,980 (40,766) 362,819 2,216,330 1,359,923 1,497,355
Net assets:
Beginning of year 3,538,077 3,578,843 3,216,024 7,667,366 6,307,443 4,810,088
---------- ---------- ---------- ---------- ---------- ----------
End of year $4,160,057 $3,538,077 $3,578,843 $9,883,696 $7,667,366 $6,307,443
========== ========== ========== ========== ========== ==========
Units sold 502,000 803,200 2,459,800 3,162,600 2,208,800
========== ========== ========== ========== ========== ==========
Units redeemed 100,400 1,154,600 200,800 1,405,600 1,305,200 903,600
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
THE SMITH BARNEY SHEARSON STRIPPED ("ZERO COUPON")
U.S. TREASURY SECURITIES FUND, SERIES A PORTFOLIO
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
Aggregate
Principal Maturity Amortized Bid Side
Amount Title of Security Coupon Date Cost Value
------ ----------------- ------ -------- --------- --------
1995 Trust
- ----------
<S> <C> <C> <C> <C> <C>
$ 4,470,000 Stripped U.S. Treasury
Securities -0- 11/15/95 $3,867,192 $4,140,785
17,880 U.S. Treasury Bonds 11.50% 11/15/95 20,417 20,232
- ----------- ---------- ----------
$ 4,487,880 $3,887,609 $4,161,017
- ----------- ========== ==========
2004 Trust
- ----------
$19,100,000 Stripped U.S. Treasury
Securities -0- 11/15/04 $7,876,753 $9,762,583
76,400 U.S. Treasury Bonds 11.625% 11/15/04 97,866 110,923
- ----------- ------- ---------- ----------
$19,176,400 $7,974,619 $9,873,506
=========== ========== ==========
Note: The aggregate values, based on offering side valuation at December 31,
1993, were:
1995 Trust $4,163,263
==========
2004 Trust $9,904,496
==========
</TABLE>
See accompanying notes.
THE SMITH BARNEY SHEARSON STRIPPED ("ZERO COUPON")
U.S. TREASURY SECURITIES FUND, SERIES A PORTFOLIO
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
Aggregate
Principal Maturity Amortized Bid Side
Amount Title of Security Coupon Date Cost Value
------ ----------------- ------ -------- --------- --------
1995 Trust
- ----------
<S> <C> <C> <C> <C> <C>
$3,970,000 Stripped U.S. Treasury
Securities -0- 11/15/95 $3,124,950 $3,433,295
15,880 U.S. Treasury Bonds 11.50% 11/15/95 18,045 18,575
- ---------- ---------- ----------
$3,985,880 $3,142,995 $3,451,870
========== ========== ==========
2004 Trust
- ----------
$18,050,000 Stripped U.S. Treasury
Securities -0- 11/15/04 $6,528,111 $7,559,881
72,200 U.S. Treasury Bonds 11.625% 11/15/04 90,050 99,027
- ----------- ---------- ----------
$18,122,200 $6,618,161 $7,658,908
=========== ========== ==========
Note: The aggregate values, based on offering side valuation at December 31,
1992, were:
1995 Trust $3,454,739
==========
2004 Trust $7,684,946
==========
</TABLE>
See accompanying notes.
THE SMITH BARNEY SHEARSON STRIPPED ("ZERO COUPON")
U.S. TREASURY SECURITIES FUND, SERIES A
NOTES TO FINANCIAL STATEMENTS
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 the principal amount of each security is being amortized
over the period to its maturity date by 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 Fund.
2. During the year ended December 31, 1993, the Sponsor, Smith Barney
Shearson Inc., formerly Shearson Lehman Brothers Inc., received
transaction charges aggregating $3,948 and $30,700 with respect to the
1995 Trust and 2004 Trust, respectively. Transaction charges with
respect to initial deposit were waived by the Sponsor.
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 $401 and $19,920 in addition
to gross unrealized appreciation of $273,809 and $1,918,807 for the 1995
Trust and 2004 Trust, respectively.
4. The aggregate cost of purchases of securities during the year ended
December 31, 1993 was $454,652 and $1,223,985 for the 1995 Trust and
2004 Trust, respectively. The aggregate proceeds from the sales during
the year ended December 31, 1993 were $91,066 and $629,521 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 are as follows (based on
average units outstanding throughout the year):
1995 Trust 2004 Trust
----------------------- -----------------------
1993 1992 1991 1993 1992 1991
------- ------- ------- ------- ------- -------
Interest income $ 65.40 $ 63.77 $ 59.50 $ 33.37 $ 30.12 $ 27.45
Expenses .62 .66 .62 .38 .39 .39
------- ------- ------- ------- ------- -------
Net investment income 64.78 63.11 58.88 32.99 29.73 27.06
Increase (decrease)
in unrealized appreciation
(depreciation) (3.67) (3.74) 54.25 59.33 5.56 39.20
------- ------- ------- ------- ------- -------
Net increase in net
asset value 61.11 59.37 113.13 92.32 35.29 66.26
Net asset value:
Beginning of year 865.84 806.47 693.34 423.09 387.80 321.54
------- ------- ------- ------- ------- -------
End of year $926.95 $865.84 $806.47 $515.41 $423.09 $387.80
======= ======= ======= ======= ======= =======
Prospectus--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 Stripped ("Zero Coupon") U.S.
Treasury Securities Fund (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 of this Prospectus 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. See "Administration of the Fund-- Portfolio
Supervision."
Units are offered for sale at a price based upon the offering side
evaluation of the Securities, plus a transaction charge of 1.50 percent 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 separate investment accounts
(the "Accounts") established by IDS Life Insurance Company ("IDS Life") and
IDS Life Insurance Company of New York ("IDS Life of New York"), which are
currently the only eligible purchasers of Units from the Sponsor. The
Accounts invest in Units to fund benefits under variable life insurance
policies issued by IDS Life and IDS Life of New York (the "Policies") in
accordance with allocation instructions received from purchasers of Policies
(the "Owners"). For further information as to the rights of 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 Trust's portfolio and hence of the Units will decline with
increases in interest rates. 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 Trust's 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) will be eligible for purchase by the Trusts
only if held in the book-entry system maintained by the Federal Reserve
pursuant to the United States Treasury's 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 custodian's 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--Accounts and Distributions." A Holder will be required to include
annually in gross income for Federal income tax purposes an allocable portion
of the discount on the Stripped Treasury Securities before the receipt of the
cash attributable to such income. Such inclusion will be on a basis that
reflects the effective semiannual 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 Sponsor's Repurchase Price will be 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 will be 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 will be 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 will 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 will be
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" and "Statements of Condition" 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,
Presidents' 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
Trust's 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, see chart below:
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, which do not reflect distribution expenses
because all sales are currently made to the Accounts, are less than sales
charges on comparable unit investment trusts offered to the public by the
Sponsor. On Units sold to the Accounts, IDS Life or IDS Life of New York
initially pays the transaction charge. IDS Life and IDS Life of New York have
represented that they intend to recover any transaction charges paid by them
from the account corresponding to the Trust with respect to which the
transaction charge was paid through a charge against the assets of such
account. 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
Sponsor's Repurchase Price. The Sponsor's 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
Sponsor's 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 Trust's portfolio
Securities on the bid side of the market in determining the Price per Unit
(see "Pricing of Units").
Because the Sponsor's 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 an Account has elected an
in-kind payment, the Sponsor therefore expects to repurchase any Units
tendered for redemption by an 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, Sponsor's 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 Sponsor's 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 of this Prospectus.
On the date of the Statement of Financial Condition of the Fund included
in Part A of this Prospectus 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 Accounts and the
Sponsor) of Units of the Fund, and not to Owners. For information on tax
consequences to 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. The total cost to a Holder for
its Units, including the transaction charge, 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.
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, and
to include annually in income a portion of such original issue discount
determined under a formula based on the compounding of interest.
Each Holder will be considered to have realized the income on its pro
rata portion of the Treasury Notes in its Trust when interest on the Notes is
received by its Trust. An individual Holder who itemizes deductions may
deduct its pro rata share of the fees and expenses of its Trust, only to the
extent that such amount together with the Holder's other miscellaneous
deductions exceeds 2% of its adjusted gross income.
A Holder will recognize taxable gain or loss when all or part of its pro
rata portion of a Security is disposed of by the Fund for an amount greater or
less than its adjusted tax basis. Any such taxable gain or loss will be
capital gain or loss except that any gain from the disposition of a Holder's
pro rata portion of a Security acquired by the Holder at a "market discount"
(i.e., if the Holder's original cost for its 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 its pro rata portion of each
Security when it sells or redeems all or some of its Units.
A distribution to a Holder of Securities upon redemption of Units will
not be a taxable event to the Holder or to nonredeeming Holders. The
redeeming Holder's basis for such Securities will be equal to its basis for
the Securities (previously represented by its Units) prior to such redemption,
and its holding period for such Securities will include the period during
which the Holder held its Units. However, a Holder may recognize taxable gain
or loss when the Holder sells the Securities so distributed for cash.
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 certain aspects of
New York State and City income taxes. Depending on their state of residence,
Holders may be subject to state and local taxation and should consult their
own tax advisers in this regard.
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, the direct holding of Units may be
appropriate only for a tax-deferred account which can have taxable income
attributed in advance of the receipt of the cash attributable to such income.
Sponsor's Profits
The Sponsor receives a transaction charge at the rates set forth under
"Sale and Redemption of Units--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 Trust's 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
Sponsor's 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 IDS Life and IDS Life of New
York to the Sponsor are not directly charged to the Accounts, IDS Life and IDS
Life of New York have represented that they will recover such transaction
charges through charges against the assets of the account corresponding to the
Trust with respect to which the transaction charge was paid. 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
semiannually 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--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 Trustee's 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 will 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 Holder's 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
initially deposited in such Trust 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--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--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 is being 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 or incorporated by reference
herein in reliance upon such report given upon the authority of such firms 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 Stripped ("Zero Coupon") U.S. Treasury
Securities Fund, Series A
Index to Parts A and B
Page
----
Investment Summary 3
Description of the Fund 4
Report of Independent Accountants 6
Statements of Financial Condition 7
Statements of Operations and Changes in Net Assets 8
Portfolio 9
Notes to Financial Statements 11
Description of the Fund 12
Sale and Redemption of Units 15
Taxes 19
Sponsor's Profits 21
Expenses and Charges 21
Administration of the Fund 22
Sponsor 26
Trustee 26
Evaluator 27
Legal Opinion 28
Independent Accountants 28
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 Stripped
("Zero Coupon")
U.S. Treasury
Securities Fund, 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 Evaluation Services Coopers & Lybrand
65 Broadway 1301 Avenue of the Americas
New York, N.Y. 10006 New York, N.Y. 10019
