<PAGE>
Registration No. 33-21620
S E C U R I T I E S A N D E X C H A N G E C O M M I S
S I O
N
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 6
to
F O R M S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF
1933
OF SECURITIES OF UNIT INVESTMENT TRUSTS
REGISTERED ON FORM N-8B-2
A. Exact Name of Trust:
SMITH BARNEY UNIT TRUSTS,
HIGH YIELD MUNICIPAL SERIES 6
(A UNIT INVESTMENT TRUST)
B.
Names of Depositors:
SMITH BARNEY INC.
<TABLE>
<S> <C>
C. Complete addresses of depositor's principal executive
office:
1345 Avenue of the Americas
New York, New York 10105
D. Names and complete addresses of agents for service:
Copy to:
THOMAS D. HARMAN, ESQ. PIERRE DE ST. PHALLE, ESQ.
Smith Barney Inc. 450 Lexington Avenue
New York, New York 10105 New York, New York 10017
</TABLE>
It is proposed that this filing will become effective December 20,
1994
pursuant to paragraph (b) of Rule 485.
<PAGE>
<TABLE>
HIGH YIELD MUNICIPAL Series 6
A UNIT INVESTMENT TRUST
<S> <C>
This Trust is a unit investment trust designed to provide
investors with a high level of current income exempt from
regular Federal income taxes through investment in a
diversified fixed portfolio consisting primarily of "high yield",
high risk" intermediate- and long-term municipal obligations.
On the Date of Deposit all of the obligations were rated in
the category B or better by either Standard & Poor's
Corporation or Moody's Investors Service, or had in the
opinion of the Sponsor comparable credit characteristics.
The value of Units of the Trust will fluctuate with the value
of the underlying Securities which will fluctuate with changes
in interest rates and in the credit ratings of the issuers and
other factors.
The Securities included in the Trust are commonly known as
"junk bonds" and are subject to greater market fluctuations
and risk of loss of income and principal than are investments
in lower-yielding, higher rated fixed-income securities. A
reduction in the credit rating of a Security or a general
increase in interest rates would be expected to decrease the
value of the underlying Portfolio. The securities included in
the Trust should be viewed as speculative and an investor
should review his ability to assume the risks associated with
speculative municipal bonds.
The minimum purchase is 1,000 Units.
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATIONS TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Inquiries should be directed to the Sponsor 1-800-298-UNIT
Prospectus dated December 20, 1994
Read and retain this Prospectus for future reference
<PAGE>
</TABLE>
<TABLE>
<PAGE>
SMITH BARNEY INC. UNIT TRUSTS, HIGH
YIELD MUNICIPAL SERIES 6
INVESTMENT SUMMARY AS OF JUNE 30, 1994
(the Evaluation Date)
<S> <C>
Face Amount of Securities . . . . . . . . . . . . . $ 8,615,000
Number of Units . . . . . . . . . . . . . . . . . . 11,862,943
Face Amount of Securities per
1,000 Units. . . . . . . . . . . . . . . . . . . . $ 726.21
Fractional Undivided Interest in
Trust Represented by Each Unit . . . . . . . . . . 1/11,862,943rd
Public Offering Price per 1,000 Units:
Aggregate bid side evaluation of
the underlying Securities plus
any undistributed principal . . . . . . . . . . $ 9,338,041*
Divided by 11,862,943 Units
times 1,000 . . . . . . . . . . . . . . . . . . $ 787.16
Plus sales charge (5.5% of Public
Offering Price, 5.82% of amount
invested in Securities)** . . . . . . . . . . . 45.81
Public Offering Price per
1,000 Units*. . . . . . . . . . . . . . . . . . $ 832.97***
Sponsor's Repurchase Price and
Redemption Price per 1,000 Units*
($45.81 less than Public Offering
Price per 1,000 Units)**** . . . . . . . . . . . . $ 787.16***
Premium and Discount Issues in Portfolio:
Face amount of Securities with
bid side evaluation -
Over par . . . . . . . . . . . . . . . . . . 91%
At par . . . . . . . . . . . . . . . . . . . 0%
Under par. . . . . . . . . . . . . . . . . . 9%
Calculation of Estimated Net Annual
Interest Rate per 1,000 Units:
Annual interest rate per
1,000 Units . . . . . . . . . . . . . . . . . . 6.70%
Less estimated annual expenses
per 1,000 Units expressed as
a percentage. . . . . . . . . . . . . . . . . . 0.154%
Estimated net annual interest
rate per 1,000 Units. . . . . . . . . . . . . . 6.546%
Daily Rate at which Estimated Net
Annual Income Accrues per
1,000 Units. . . . . . . . . . . . . . . . . . . . 0.0182%
Monthly Income Distributions per
1,000 Units. . . . . . . . . . . . . . . . . . . . $ 5.46
Evaluation Time - 4:00 P.M. New York Time
Record Day - The fifteenth day of each month
Distribution Day - The first day of the following month
Minimum Capital Distribution
No distribution need be made from Capital Account if
balance in Account is less than $5.00 per 1,000 Units.<PAGE>
Mandatory Termination Date
One year after the maturity date of the last maturing
Security listed under the Portfolio (see Portfolio)
Minimum Value of Trust
Trust may be terminated if the value of the Trust is less
than 40% of the face amount of Securities on the Date of
Deposit. As of the Evaluation Date the value of the Trust
was 69% of the original Face Amount of the Securities.
Trustee's Annual Fee
$0.72 per $1,000 face amount of Securities (see Expenses
and Charges)
Sponsor's Annual Fee
Maximum of $0.25 per $1,000 face amount of Securities
(see Expenses and Charges)
Evaluator's Fee for Each Evaluation
Maximum of $15 per Evaluation (see Expenses and
Charges)
Number of Issues in Portfolio . . . . . . . . . . . . . . . . 14
Number of Issues/Percentage of Aggregate
Face Amount of Portfolio Rated by:*****
Standard & Poor's Corporation -
AAA. . . . . . . . . . . . . . . . . . . . . . . . . . 2 (7%)
A. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (1%)
BBB. . . . . . . . . . . . . . . . . . . . . . . . . . 4 (37%)
B. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (8%)
Moody's Investors Service -
Aaa. . . . . . . . . . . . . . . . . . . . . . . . . . 2 (7%)
Baa. . . . . . . . . . . . . . . . . . . . . . . . . . 2 (14%)
Ba . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (6%)
Number of Issues Not Rated:****** . . . . . . . . . . . . . . 4 (44%)
Number of Issuers by Industry/
Industry Concentrations:
Hospitals. . . . . . . . . . . . . . . . . . . . . . . . . 9 (64%)
Housing. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . 1
Pollution Control. . . . . . . . . . . . . . . . . . . . . 1
Solid Waste Disposal . . . . . . . . . . . . . . . . . . . 1
State/Local Municipal Electric Utilities . . . . . . . . . 1
Percentage of Aggregate Face Amount of
Portfolio Comprised of:
Alternative Minimum Tax Bonds
(see Portfolio and Taxes) . . . . . . . . . . . . . . . . 18%
Obligations of issuers located in 3 States
of West Virginia (34%) Arizona (21%)
and Texas (13%) . . . . . . . . . . . . . . . . . . . . . 68%
<FN>
On the Date of Deposit (May 19, 1988), the face amount
of Securities was $14,000,000.
On the Evaluation Date none of the Portfolio consisted
of defaulted bonds. (See Risk Factors - "High Yield"
Bonds).
* Subject to changes in the prices of the underlying bonds.
The aggregate bid price of the Securities is determined
on each business day as of the Evaluation Time, effective
for all sales made subsequent to the last preceding
determination and does not include Securities received in
lieu of cash interest payments which are included in
undistributed net investment income.
** The sales charge will be reduced on a graduated scale in
the case of quantity purchases of Units (see Public Sale
of Units - Public Offering Price). The resulting reduction
in the Public Offering Price will increase the effective
current return on a Unit.
*** Plus accrued interest. For Units purchased or redeemed
on the Evaluation Date, accrued interest is approximately
equal to the undistributed net investment income of the
Trust (see Statement of Assets and Liabilities) divided by
the number of outstanding Units plus the estimated daily
interest accrual per Unit and less the daily expense
accrual per Unit to the expected date of settlement
(normally 5 business days after purchase or redemption).
**** Based upon the aggregate bid prices of the underlying
Securities in the Trust. Upon redemption, the price to
be paid will include an amount as described under
Redemption - Computation of Redemption Price per
Unit.
***** Ratings subject to change from time to time. Certain of
the ratings may be provisional or conditional. See
Description of Ratings.
****** Issues currently unrated by both Standard & Poor's and
Moody's. See Description of Ratings.
A Trust is considered to be "concentrated" in a particular
category when the Securities in that category constitute
25% or more of the aggregate face amount of the
Portfolio (see Other Risk Factors).
The Trust is considered to be concentrated in obligations
of issuers located in West Virginia. A portfolio of
obligations concentrated in a single state may involve less
diversification of risk than a portfolio diversified among
obligations of issuers located in many states.
</TABLE>
<PAGE>
Independent Auditors' Report
The Unitholders, Sponsor and Trustee of
Smith Barney Shearson Unit Trusts,
High Yield Municipal Series 6:
We have audited the accompanying statement of assets and
liabilities of Smith Barney Shearson Unit Trusts, High Yield
Municipal Series 6, including the schedule of portfolio investments,
as of June 30, 1994, the related statements of operations and
changes in net assets for the year then ended, and the selected
supplemental per-unit data for the year then ended. These financial
statements are the responsibility of the Trustee. Our responsibility
is to express an opinion on these financial statements based on our
audit.
We conducted our audit 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 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 confirmation of investments held by the
Trustee as of June 30, 1994. An audit also includes assessing the
accounting principles used and significant estimates made by the
Trustee, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Smith Barney
Shearson Unit Trusts, High Yield Municipal Series 6 as of June 30,
1994, the results of its operations and changes in its net assets for
the year then ended, and the selected supplemental per-unit data
for the year then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
October 28, 1994
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Unitholders, Sponsor and Trustee of
Smith Barney Shearson Unit Trusts,
High Yield Municipal Series 6:
We have audited the accompanying statements
of operations and changes in net assets and the selected
supplemental per-unit data for the years ended
June 30, 1993 and 1992,of the Smith Barney
Shearson Unit Trusts,High Yield Municipal Series 6
(formerly Shearson Lehman Brothers Unit Trusts,
High Yield Municipal Series 6).
These financial statements are
the responsibility of the Trustee. Our responsibility is
to express an opinion on these financial statements based on
our audits.
We conducted our audit 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 are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements.An audit also includes assessing
the accounting principles used and significant estimates made
by the Trustee, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects,
the results of operations and changes in net assets
and the selected supplemental per-unit data
of the Smith Barney Shearson Unit Trusts, High Yield
Municipal Series 6 (formerly Shearson Lehman
Brothers Unit Trusts,High Yield Municipal Series 6)for
the years ended June 30, 1993 and 1992, for the years
ended June 30, 1993 and 1992, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts /s/COOPERS & LYBRAND
August 20, 1993
<PAGE>
<TABLE>
<PAGE>
SMITH BARNEY SHEARSON Unit TrustS,
High Yield Municipal Series 6
Statement of Assets and Liabilities
June 30, 1994
Assets:
<S> <C>
Investments in securities, at value (cost $8,509,299)
(see accompanying schedule of portfolio investments) $
9,337,534
Interest receivable 146,845
Cash - income account 184,643
Cash - principal account 507
Total assets 9,669,529
Liabilities:
Accrued fees and expenses 20,542
Accrued income distribution 64,772
Total liabilities 85,314
Net assets at June 30, 1994 equivalent to
$807.91 per 1,000 units on 11,862,943 units
of fractional undivided interest outstanding $9,584,215
Net assets consist of:
Cost of 14,000,000 units at date of deposit 14,269,509
Sales charge (642,123)
13,627,386
Accumulated cost of bonds sold or called (5,118,087)
Net unrealized appreciation 828,235
Undistributed net investment income 246,174
Undistributed proceeds from bonds sold or called 507
$9,584,215
See accompanying notes to financial statements.
<PAGE>
<PAGE>
SMITH BARNEY SHEARSON Unit TrustS,
High Yield Municipal Series 6
Statements of Operations
Years ended June 30, 1994, 1993 and 1992
<S> <C> <C> <C>
1994 1993 1992
Income:
Interest income $818,119 858,293 986,279
Total income 818,119 858,293 986,279
Total expenses (note 3) 25,318 19,175 22,985
Investment income - net 792,801 839,118 963,294
Realized and unrealized gain (loss)
on investments:
Net realized gain 134,627 64 224,868
Increase (decrease) in unrealized
appreciation of investments - net (173,879) 395,020 608,413
Net gain (loss) on investments (39,252) 395,084 833,281
Net increase in net assets
resulting from operations $753,549 1,234,202 1,796,575
See accompanying notes to financial statements.
PAGE
<PAGE>
SMITH BARNEY SHEARSON Unit TrustS,
High Yield Municipal Series 6
Statements of Changes in Net Assets
Years ended June 30, 1994, 1993 and 1992
1994 1993 1992
Operations:
Investments income - net $ 792,801 839,118 963,294
Net realized gain 134,627 64 224,868
Increase (decrease) in unrealized
appreciation of investments - net (173,879) 395,020 608,413
Net increase in net assets
resulting from operations 753,549 1,234,202 1,796,575
Distributions to Unitholders (note 2):
Principal (814,928) (859,578) (1,530,335)
Investment income - net (800,121) (838,982) (972,712)
Total distribution (1,615,049) (1,698,560) (2,503,047)
Redemption of units:
Principal (35,513) (154,075)
Investment income - net (871) (3,629)
Total redemptions (36,384) (157,7034)
Decrease in net assets (897,884) (464,358) (864,176)
Net assets:
Beginning of year 10,482,099 10,946,457 11,810,633
End of year $9,584,215 10,482,099 10,946,457
Other information:
Undistributed net investment income,
end of year $ 246,174 254,365 254,229
Units redeemed Uts. 42,575 155,859
See accompanying notes to financial statements.
</TABLE>
PAGE
<PAGE>
SMITH BARNEY SHEARSON Unit TrustS,
High Yield Municipal Series 6
Notes to Financial Statements
June 30, 1994
(1) Summary of Significant Accounting Policies
Smith Barney Shearson Unit Trusts, High Yield Municipal Series
6 (the "Trust"), (formerly Shearson Lehman Brothers Unit Trusts,
High Yield Municipal Series 6) 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 Trust:
(a) Bonds are stated at value as determined by Kenny S&P
Evaluation Services (the "Evaluator") on the basis set forth under
"Public Sale of Units - Public Offering Price" in this Prospectus,
using bid side evaluations. Cost is based on offering side
evaluations at the date of deposit, May 19, 1988.
(b) The Trust is not an association taxable as a corporation for
Federal income tax purposes; accordingly, no provision for taxes on
income is required (see "Taxes" in this Prospectus).
(c) Investment transactions are recorded as of the trade date.
Realized gains or losses on sales of investments are determined on
the identified cost basis for financial reporting and tax purposes.
Interest income is recorded on the accrual basis.
(d) Certain 1993 and 1992 amounts have been reclassified to
conform with 1994 financial statement classifications.
(2) Distributions and Redemptions
Monthly distributions of net investment income to Unitholders are
made in cash on the first day of each month to holders of record as
of the 15th day of the preceding month. Receipts other than
interest, after deductions for redemptions and applicable expenses,
are distributed as explained in "Administration of the Trust -
Accounts and Distributions" in this Prospectus. Units may be
redeemed upon delivery of a request for redemption to the Trustee.
(3) Fees and Transactions with Affiliates
Sponsor
The Sponsor, Smith Barney Shearson Inc. (formerly Shearson
Lehman Brothers Inc., ("Shearson")) receives an annual fee
(maximum of $.25 per $1,000 face amount of securities in the Trust)
for service it renders with respect to monitoring, and when
necessary, providing advice to the Trustee with respect to any
adverse market or credit factors concerning the security investments
of the Trust and any actions taken by the issuers of such securities
that may affect the issuer's capital structure, as provided by the
Indenture.
The Sponsor receives a sales charge applicable to purchases of units
at a rate of 5.50% of the Offering Price.
(Continued)
PAGE
<PAGE>
2
SMITH BARNEY SHEARSON Unit TrustS,
High Yield Municipal Series 6
Notes to Financial Statements
(3), Continued
On March 12, 1993, Primerica Corporation ("Primerica"), Smith
Barney, Harris Upham & Co. Incorporated ("Smith Barney") and
Shearson signed a definitive agreement pursuant to which Primerica
and Smith Barney would acquire the assets of the domestic retail
brokerage and asset management businesses of Shearson (the
"Transaction"). On July 31, 1993, the Transaction between
Shearson, Primerica and Smith Barney was completed. Effective as
of the close of business on that day, Smith Barney was renamed
Smith Barney Shearson Inc. and became the Sponsor of the Trust.
Trustee
Until June 30, 1994, Boston Safe Deposit and Trust Company
("Boston Safe") acted as Trustee and Distribution Agent for an
annual fee ($.72 per $1,000 face amount) paid monthly on the
largest face amount of securities in the Trust during the preceding
month. Effective July 1, 1994, United States Trust Company of
New York became the new trustee.
(4) Concentration of Risk
The Securities in the Trust are concentrated in "high yield"
municipal bonds (see "Risk Factors" in this Prospectus).
(5) Selected Supplemental Per-Unit Data
Selected data per 1,000 units of the Trust outstanding for each of
the years in the three-year period ended June 30, 1994 is as follows:
<TABLE>
Year Units Net asset Income Principal
ended outstanding value distributions distributions
<S> <C> <C> <C><C>
June 30, 1992 11,905,518 $ 919.44 81.30 128.54
June 30, 1993 11,905,518 880.44 70.47 72.20
June 30, 1994 11,862,943 807.91 67.21 68.45
</TABLE>
(Continued)
PAGE
<PAGE>
SMITH BARNEY SHEARSON Unit TrustS,
High Yield Municipal Series 6
Notes to Financial Statements
(6) Notes to Portfolio
(a) Commencing on the date indicated, sinking fund
redemptions are at par and generally redeem only part of an issue.
Optional refunding redemptions, which may be exercised in whole
or in part, are initially at the price indicated in the portfolio, then
subsequently at prices declining to par. Certain bonds may provide
for redemption at par prior or in addition to any optional or
mandatory redemption dates or maturity. Some of the securities
may have mandatory sinking funds which contain optional
provisions permitting the issuer to increase the principal amount of
bonds called on a mandatory redemption date.
(b) At June 30, 1994, the aggregate cost of investments for
Federal income tax purposes was the same as the cost for financial
reporting purposes, which was $8,509,299.
At June 30, 1994, the net unrealized appreciation of bonds
consisted of:
<TABLE>
<S> <C>
Gross unrealized appreciation $838,973
Gross unrealized depreciation (10,738)
Net unrealized appreciation $ 828,235
</TABLE>
(c) A description of the ratings symbols and their meanings, as
described by the rating companies themselves, appears under
"Description of Ratings" in this Prospectus.
<PAGE>
<TABLE>
PORTFOLIO OF SMITH BARNEY UNIT
TRUSTS, AS OF JUNE 30, 1994
HIGH YIELD MUNICIPAL SERIES 6
Ratings of
Issues(6c)
Moody's Standard
Optional Sinking
Portfolio No. and Title of Investors & Poor's
Face Refunding
Fund Value
Securities Service Corp.
Amount Coupon Maturities
Redemptions(6a) Redemptions(6a) (Notes 1
and (6b))
<S> <C>
<C> <C>
<C> <C>
1. Arizona Health Facility Authority, Ba NR
$325,000 10.125%
11/01/2015 11/01/1995 @
102.000 11/01/1996 $
338,000
Hospital System Revenue Refunding
Bonds, (St. Luke's Health System),
Series 1985A
2. Brazos River Authority (Texas), Baa2 BBB
370,000 9.250
03/01/2018 03/01/1998 @
102.000 03/01/2000
414,459
Collateralized Pollution Control
Revenue Bonds (Texas Utilities
Electric Company Project), Series 1988A*
3. City of Elizabethtown (Kentucky), NR NR
250,000 10.250
12/01/2016 12/01/1996 @
103.000 12/01/2002
269,700
Industrial Building Revenue Bonds,
Series 1986A (Elizabethtown Medical
Rehabilitation Center Project)*
4. City of Sikeston, Missouri, Electric Aaa AAA
375,000 6.250
06/01/2008 -
06/01/1999 373,249
System Revenue Bonds, 1978 Series A
5. Greater Detroit Resource Recovery NR BBB-
500,000 9.250
12/13/2008 12/13/1995 @
103.000 12/13/1999
533,850
Authority, Michigan, Adjustable/Fixed
Rate Resource Recovery Revenue Bonds,
Series H 1984
6. Hospital Authority of Marion County Aaa AAA
229,000 8.625
10/012012 10/01/1999 @
102.000 -
266,272
(Indiana), Hospital Revenue Refunding
Bonds, Series 1987 (University Heights
Hospital)
7. Hospital Revenue Refunding Bonds, NR A-
85,000 10.000
10/01/2014 10/01/1995 @
103.000 - 93,132
Prerefunded 1985 Series C (The Health
Central System Project), City of New
Ulm, Minnesota
8. Industrial Development Corporation of Baa3
BBB- 785,000 10.250
06/01/2017 06/01/1997 @
103.000 06/01/2009
889,240
Port of Corpus Christi, Texas, Refunding
Revenue Bonds, Series 1987A (Valero
Refining and Marketing Company Project)
The accompanying notes are an integral part of the financial
statements.
9
<PAGE>
PORTFOLIO OF SMITH BARNEY UNIT
TRUSTS, AS OF JUNE 30, 1994
HIGH YIELD MUNICIPAL SERIES 6
(Continued)
Ratings of
Issues(6c)
Moody's Standard
Optional Sinking
Portfolio No. and Title of Investors & Poor's
Face Refunding
Fund Value
Securities Service Corp.
Amount Coupon Maturities
Redemptions(6a) Redemptions(6a) (Notes 1
and (6b))
9. Michigan State Hospital Finance Authority, Ba
B+ $245,000 7.500%
11/01/2010 11/01/1997 @
102.000 11/01/1999 $
242,013
Hospital Revenue and Refunding Bonds,
(Detroit Osteopathic Hospital Corporation),
Series 1987A
10. St. John's County, Florida, Industrial NR NR
981,000 9.500
02/01/2017 02/01/1997 @
103.000 -
1,112,091
Development Authority, Industrial
Development Revenue Bonds, Prerefunded
Series 1987A (Vicars Landing Project)
11. The Industrial Development Authority of NR
NR 1,500,000 10.000
06/01/2017 06/01/1997 @
103.000 06/01/2008
1,677,300
the City of Scottsdale, Arizona, First
Mortgage Revenue Bonds, Series 1987
(Westminster Village, Inc. Project)
12. West Virginia Hospital Finance Authority, NR
B+ 500,000 7.750
08/15/2013 08/15/1994 @
104.000 08/15/2000
478,385
Hospital Revenue Refunding Bonds, Series
1986 (St. Francis Hospital of Charleston,
West Virginia)
13. West Virginia Hospital Finance Authority, NR BBB-
1,500,000 8.750
04/01/2013 04/01/1996 @
102.000 04/01/2002
1,603,785
State of West Virginia, Hospital Revenue
Refunding Bonds, Series 1986 (Logan
General Hospital Project)
14. Wood County, West Virginia, Commercial NR
NR 970,000 9.500
12/01/2015 12/01/1996 @
103.000 08/01/1996
1,046,058
Development Revenue Bonds (West Virginia
Rehabilitation Services, Inc., Project),
1986 Series*
________
________
$8,615,000
$9,337,534
* Alternative Minimum Tax Bond (See Other Risk Factors -
Alternative Minimum Tax Bonds on page ___).
The accompanying notes are an integral part of the financial
statements.
</TABLE>
<PAGE>
TRUST STRUCTURE
This Series (the "Trust") of Smith Barney Unit Trusts is a
"unit investment trust" created under New York law by a Trust
Indenture (the "Indenture") among the Sponsor, the Trustee and
the Evaluator. To the extent that references in this Prospectus
are to articles and sections of the Indenture, which are
incorporated by reference into this Prospectus, the statements
made herein are qualified in their entirety by this reference.
The Securities listed under Portfolio have been deposited with
the Trustee.
Certain of the Securities in the Trust may have been valued
at a market discount. Securities trade at less than par value
because the interest rates on the securities are lower than
interest on comparable debt securities being issued at currently
prevailing interest rates. The current returns of securities
trading at a market discount are lower than the current returns
of comparably rated debt securities of a similar type issued at
currently prevailing interest rates because discount securities
tend to increase in market value as they approach maturity and
the full principal amount becomes payable. If currently
prevailing interest rates for newly issued and otherwise
comparable securities increase, the market discount of previously
issued securities will become deeper, and if currently prevailing
interest rates for newly issued comparable securities decline, the
market discount of previously issued securities will be reduced,
other things being equal. Market discount attributable to
interest rate changes does not indicate a lack of market
confidence in the issue.
Certain of the Securities in the Trust may have been valued
at a market premium. Securities trade at a premium because the
interest rates on the Securities are higher than interest on
comparable debt securities being issued at currently prevailing
interest rates. The current returns of securities trading at a
market premium are higher than the current returns of
comparably rated debt securities of a similar type issued at
currently prevailing interest rates because premium securities
tend to decrease in market value as they approach maturity
when the face amount becomes payable. Because part of the
purchase price is returned not at maturity but through current
income payments, an early redemption of a premium security at
par will result in a reduction in yield. If currently prevailing
interest rates for newly issued and otherwise comparable
securities increase, the market premium of previously issued
securities will decline and if currently prevailing interest rates for
newly issued comparable securities decline, the market premium
of previously issued securities will increase, other things being
equal. Market premium attributable to interest rate changes
does not indicate market confidence in the issue.
The holders ("Holders") of Units will have the right to have
their Units redeemed (see Redemption) at a price based on the
aggregate bid side evaluation of the Securities ("Redemption
Price per Unit") if they cannot be sold in the over-the-counter
market that the Sponsor proposes to maintain (see Market for
Units). The Trust will not continuously offer Units for sale to
the public. On the Evaluation Date each unit of interest
("Unit") represented the fractional undivided interest in the
Securities and net income of the Trust set forth under
Investment Summary. Thereafter, if any Units are redeemed, the
face amount of Securities in the Trust will be reduced, and the
fractional undivided interest represented by each remaining Unit
in the balance will be increased. Units will remain outstanding
until redeemed upon tender to the Trustee by any Holder (which
may include the Sponsor) or until the termination of the
Indenture (see Redemption; Administration of the Trust--
Amendment and Termination).
<PAGE>
RISK FACTORS
"High Yield" Bonds
An investment in Units of the Trust should be made with
an understanding of the risks that an investment in "high yield",
fixed-rate intermediate- and long-term municipal debt
obligations or "junk bonds" may entail, including increased credit
risks and the risk that the value of the Units will decline, and
may decline precipitously, with increases in interest rates or
reductions in the credit quality of the underlying Securities. In
recent years, there have been wide fluctuations in interest rates
and thus in the value of fixed-rate debt obligations generally.
Securities such as those included in the Trust are, under most
circumstances, subject to greater market fluctuations and risk of
loss of income and principal than are investments in lower
yielding, higher rated securities, and their value may decline
precipitously because of increases in interest rates, not only
because the increases in rates generally decrease values but also
because increased rates may indicate a slowdown in the economy
and a decrease in the value of assets generally that may
adversely affect the credit of issuers of high yield securities
resulting in a higher incidence of default among high yield
securities. The Sponsor cannot predict future economic policies
or their consequences, or therefore, the course or extent of any
similar market fluctuations in the future. To the extent that
payment of amounts due on the Securities depends on revenue
from publicly held corporations, an investor should realize that
these Securities, in many cases, do not have the benefit of
covenants that would prevent the corporations from engaging in
capital restructurings which could have the effect of reducing the
ability of the issuer to meet its obligations and might result in
the ratings of the Securities and the value of the underlying
Portfolio being reduced.
The Trust portfolio contains "high yield" municipal bonds.
"High yield" or "junk" bonds, the generic names for bonds that,
if rated, are rated below BBB by Standard & Poor's or Baa by
Moody's. Trading of high yield bonds takes place primarily in
over-the-counter markets consisting of groups of dealer firms
that are typically major securities firms. Because the high yield
bond market is a dealer market, rather than an auction market,
no single obtainable price for a given bond prevails at any given
time. Prices are determined by negotiation between traders.
The existence of a liquid trading market for the Securities may
depend on whether dealers will make a market in the Securities.
There can be no assurance that a market will be made for any
of the Securities, that any market for the Securities will be
maintained or of the liquidity of the Securities in any markets
made. Not all dealers maintain markets in all high yield bonds.
Therefore, since there are fewer traders in these bonds than
there are in "investment grade" bonds, the bid-offer spread is
usually greater for high yield bonds than it is for investment
grade bonds. In addition, the Trust may be restricted under the
Investment Company Act of 1940 from selling Securities to the
Sponsor. The price at which the Securities may be sold to meet
redemptions and the value of the Trust will be adversely affected
if trading markets for the Securities are limited or absent. If the
rate of redemptions is great, the value of the Trust may decline
to a level that requires liquidation (see Amendment and
Termination).
Lower-rated and comparable non-rated securities tend to
offer higher yields than higher-rated securities with the same
maturities because the creditworthiness of the issuers of lower-
rated securities may not be as strong as that of other issuers.
Because investors generally perceive that there are greater risks
associated with the lower-rated and non-rated securities in the
Trust, the yields and prices of these securities tend to fluctuate
more than higher-rated securities with changes in the perceived
quality of the credit of their issuers. In addition, the market
value of high yield, fixed-
<PAGE>
income securities may fluctuate more than the market value of
higher-rated securities since high yield, fixed-income securities
tend to reflect short-term credit developments to a greater extent
than higher-rated securities. Also, because high yield bonds may
be more sensitive to adverse changes in credit status than bonds
of investment grade, sales of Securities from the Portfolio may
occur more frequently than sales of portfolio securities from
trusts invested in higher-rated bonds; this could result in possible
loss of principal and a more rapid decline in the size of the
Trust than otherwise would be the case. Lower-rated and non-
rated securities generally involve greater risks of loss of income
and principal than higher-rated securities, and recent studies
have indicated that the number of defaults by issuers and the
amount of debt in default have increased substantially in the past
few years. The issuers of lower-rated and non-rated securities
may possess less creditworthy characteristics than the issuers of
higher-rated securities and, especially in the case of issuers
whose obligations or credit standing have recently been
downgraded, may be subject to claims by debtholders, owners of
property leased to the issuer or others that, if sustained, would
make it more difficult for the issuers to meet their payment
obligations. High yield bonds are also affected by variables such
as interest rates, inflation rates and real growth in the economy.
Therefore, investors should consider carefully the relative risks
associated with investment in securities which carry lower ratings
or which are not rated. Finally, the value of the Units reflects
the value of the portfolio securities, including the value (if any)
of securities in default. Should any Security default in the
payment of principal or interest, the Trust may incur additional
expenses seeking payment on the defaulted Security. Because
amounts (if any) recovered by the Trust in payment under the
defaulted Security may not be reflected in the value of the Units
until actually received by the Trust, and depending upon when
a Holder purchases or sells his Units, it is possible that a Holder
would bear a portion of the cost of recovery without receiving
any portion of the payment recovered.
Securities that are rated lower than BBB or Baa should be
considered speculative as such ratings indicate a quality of less
than investment grade. Securities that are not rated by either
Standard & Poor's or Moody's should also be considered
speculative. There is no established retail secondary market for
many of these Securities. The Sponsor does not anticipate that
these Securities could be sold other than to institutional
investors. However, the Sponsor expects that there is a readily
available market among institutional investors for these
Securities in the event it is necessary to sell such Securities to
meet redemptions of Units. The limited market for these
Securities may affect the price of the particular Security to be
sold for purposes of redemption and the amount actually
realized by the Trust upon a sale. Any sale may therefore result
in a loss to the Trust. Investors should carefully review the
objective of the Trust and consider their ability to assume the
risks involved before making an investment in the Trust. (See
Description of Ratings for a description of speculative ratings
issued by Standard & Poor's and Moody's.)
Other Risk Factors
As set forth under Investment Summary and Portfolio, the
Trust may contain or be concentrated* in one or more of the
classifications of Securities referred to below. Percentages of
any concentrations for this Trust are set forth under Investment
Summary. An investment in Units of the Trust should be made
with an understanding of the risks which these investments may
entail, certain of which are described below.
__________
* A Trust is considered to be "concentrated" in a particular
category when the Securities in that category constitute 25% or
more of the aggregate face amount of the Portfolio.
<PAGE>
General Obligation Bonds. Certain of the Debt Obligations
in the Trust may be general obligations of a governmental entity.
General obligation bonds are backed by the issuer's pledge of its
full faith, credit and taxing power for the payment of principal
and interest. However, the taxing power of any governmental
entity may be limited by provisions of state constitutions or laws
and an entity's credit will depend on many factors, including an
erosion of the tax base due to population declines, natural
disasters, declines in the state's industrial base or inability to
attract new industries, economic limits on the ability to tax
without eroding the tax base, the extent to which the entity relies
on Federal or state aid, and access to capital markets or other
factors beyond the entity's control.
In addition, certain of the Debt Obligations in the Trust
may be obligations of issuers that rely in whole or in part on ad
valorem real property taxes as a source of revenue. Certain
proposals, in the form of state legislative proposals or voter
initiatives, to limit ad valorem real property taxes have been
introduced in various states. The Sponsor cannot predict the
final impact of future legislative or constitutional measures on
school districts and local governments or on their abilities to
make future payments on their outstanding debt obligations.
Moral Obligation Bonds. The Trust may also include
"moral obligation" bonds. If an issuer of moral obligation bonds
is unable to meet its obligations, the repayment of the bonds
becomes a moral commitment but not a legal obligation of the
state or municipality in question. Even though the state may be
called on to restore any deficits in capital reserve funds of the
agencies or authorities which issued the bonds, any restoration
generally requires appropriation by the state legislature and
accordingly the statutes do not constitute a legally enforceable
obligation or debt of the state. The agencies or authorities
generally have no taxing power.
Pollution Control Revenue Bonds. Pollution control
revenue bonds are a type of industrial revenue bond ("IRBs").
IRBs are tax exempt securities issued by states, municipalities,
public authorities or similar entities ("issuers") to finance the cost
of acquiring, constructing or improving various projects,
including pollution control facilities and certain industrial
development facilities. These projects are usually operated by
corporate entities. IRBs are not general obligations of
governmental entities backed by their taxing power. Issuers are
only obligated to pay amounts due on the IRBs to the extent
that funds are available from the unexpended proceeds of the
IRBs or receipts or revenues of the issuer under arrangements
between the issuer and the corporate operator of a project.
These arrangements may be in the form of a lease, installment
sale agreement, conditional sale agreement or loan agreement,
but in each case the payments to the issuer are designed to be
sufficient to meet the payments of amounts due on the IRBs.
IRBs are generally issued under bond resolutions,
agreements or trust indentures pursuant to which the revenues
and receipts payable under the issuer's arrangements with the
corporate operator of a particular project have been assigned
and pledged to the holders of the IRBs or a trustee for the
benefit of the holders of the IRBs. In certain cases, a mortgage
on the underlying project has been assigned to the holders of the
IRBs or a trustee as additional security for the IRBs. In
addition, IRBs are frequently directly guaranteed by the
corporate operator of the project or by another affiliated
company. Regardless of the structure, payment of IRBs is solely
dependent upon the creditworthiness of the corporate operator
of the project or corporate guarantor. Corporate operators or
guarantors that are industrial companies may be affected by
many factors which may have an adverse impact on the credit
quality of the particular company or industry. These include
cyclicality of revenues and earnings, regulatory and
environmental restrictions, litigation resulting
<PAGE>
from accidents or environmentally-caused illnesses, extensive
competition (including that of low-cost foreign companies),
unfunded pension fund liabilities or off-balance sheet items, and
financial deterioration resulting from leveraged buy-outs or
takeovers.
Alternative Minimum Tax Bonds. Interest from alternative
minimum tax bonds (generally called private activity bonds in the
Code), other than from bonds issued for charitable, educational
and certain other purposes, is exempt from the regular Federal
income tax for individuals and corporations. However, such
interest is a preference item for purposes of the alternative
minimum tax for individuals and corporations. Investors should
be aware that available returns from newly issued Debt
Obligations acquired by the Trust that are not alternative
minimum tax bonds may be lower than those from alternative
minimum tax bonds due to the possibility of Federal tax liability
on interest arising from alternative minimum tax bonds. (See
Taxes.)
Debt Obligations of Utilities. The ability of investor-owned
and municipal utilities to meet their obligations with respect to
revenue bonds issued on their behalf is dependent on various
factors, including the rates they may charge their customers, the
demand for a utility's services and the cost of providing those
services. Utilities, in particular investor-owned utilities, are
subject to extensive regulation relating to the rates which they
may charge customers. Utilities can experience regulatory,
political and consumer resistance to rate increases. Utilities
engaged in long-term capital projects are especially sensitive to
regulatory lags in granting rate increases. Any difficulty in
obtaining timely and adequate rate increases could adversely
affect a utility's results of operations.
The demand for a utility's services is influenced by, among
other factors, competition, weather conditions and economic
conditions. Electric utilities, for example, have experienced
increased competition as a result of the availability of other
energy sources, the effects of conservation on the use of
electricity, self-generation by industrial customers and the
generation of electricity by co-generators and other independent
power producers. Also, increased competition will result if
Federal regulators determine that utilities must open their
transmission lines to competitors. Utilities which distribute
natural gas also are subject to competition from alternative
fuels, including fuel oil, propane and coal.
The utility industry is an increasing cost business making the
cost of generating electricity more expensive and heightening its
sensitivity to regulation. A utility's costs are influenced by the
utility's cost of capital, the availability and cost of fuel and other
factors. In addition, natural gas pipeline and distribution
companies have incurred increased costs as a result of long-term
natural gas purchase contracts containing "take or pay"
provisions which require that they pay for natural gas even if
natural gas is not taken by them. There can be no assurance
that a utility will be able to pass on these increased costs to
customers through increased rates. Utilities incur substantial
capital expenditures for plant and equipment. In the future,
they will also incur increasing capital and operating expenses to
comply with environmental legislation such as the Clean Air Act
of 1990, and other energy, licensing and other laws and
regulations relating to, among other things, air emissions, the
quality of drinking water, waste water discharge, solid and
hazardous substance handling and disposal, and citing and
licensing of facilities. Environmental legislation and regulations
are changing rapidly and are the subject of current public policy
debate and legislative proposals. It is increasingly likely that
some or many utilities will be subject to more stringent
environmental standards in the future that could result in
significant capital expenditures. Future legislation and
regulation could include, among other things, regulation of so-
called electromagnetic
<PAGE>
fields associated with electric transmission and distribution lines
as well as emissions of carbon dioxide and other so-called
greenhouse gases associated with the burning of fossil fuels.
Compliance with these requirements may limit a utility's
operations or require substantial investments in new equipment
and, as a result, may adversely affect a utility's results of
operations.
The electric utility industry in general is subject to various
external factors including (a) the effects of inflation upon the
costs of operation and construction, (b) substantially increased
capital outlays and longer construction periods for larger and
more complex new generating units, (c) uncertainties in
predicting future load requirements, (d) increased financing
requirements coupled with limited availability of capital, (e)
exposure to cancellation and penalty charges on new generating
units under construction, (f) problems of cost and availability of
fuel, (g) compliance with rapidly changing and complex
environmental, safety and licensing requirements, (h) litigation
and proposed legislation designed to delay or prevent
construction of generating and other facilities, (i) the uncertain
effects of conservation on the use of electric energy, (j)
uncertainties associated with the development of a national
energy policy, (k) regulatory, political and consumer resistance
to rate increases and (l) increased competition as a result of the
availability of other energy sources. These factors may delay
the construction and increase the cost of new facilities, limit the
use of, or necessitate costly modifications to, existing facilities,
impair the access of electric utilities to credit markets, or
substantially increase the cost of credit for electric generating
facilities. The Sponsors cannot predict at this time the ultimate
effect of such factors on the ability of any issuers to meet their
obligations with respect to Bonds.
The National Energy Policy Act ("NEPA"), which became
law in October, 1992, makes it mandatory for a utility to permit
non-utility generators of electricity access to its transmission
system for wholesale customers, thereby increasing competition
for electric utilities. NEPA also mandated demand-side
management policies to be considered by utilities. NEPA
prohibits the Federal Energy Regulatory Commission from
mandating electric utilities to engage in retail wheeling, which
is competition among suppliers of electric generation to provide
electricity to retail customers (particularly industrial retail
customers) of a utility. However, under NEPA, a state can
mandate retail wheeling under certain conditions.
There is a concern by the public, the scientific community,
and the U.S. Congress regarding environmental damage
resulting from the use of fossil fuels. Congressional support for
the increased regulation of air, water, and soil contaminants is
building and there are a number of pending or recently enacted
legislative proposals which may affect the electric utility
industry. In particular, on November 15, 1990, legislation was
signed into law that substantially revises the Clean Air Act (the
"1990 Amendments"). The 1990 Amendments seek to improve
the ambient air quality throughout the United States by the year
2000. A main feature of the 1990 Amendments is the reduction
of sulphur dioxide and nitrogen oxide emissions caused by
electric utility power plants, particularly those fueled by coal.
Under the 1990 Amendments the U.S. Environmental
Protection Agency ("EPA") must develop limits for nitrogen
oxide emissions by 1993. The sulphur dioxide reduction will be
achieved in two phases. Phase I addresses specific generating
units named in the 1990 Amendments. In Phase II the total
U.S. emissions will be capped at 8.9 million tons by the year
2000. The 1990 Amendments contain provisions for allocating
allowances to power plants based on historical or calculated
levels. An allowance is defined as the authorization to emit one
ton of sulphur dioxide.
<PAGE> The 1990
Amendments also provide for possible further regulation of
toxic air emissions from electric generating units pending the
results of several federal government studies to be conducted
over the next three to four years with respect to anticipated
hazards to public health, available corrective technologies, and
mercury toxicity.
Electric utilities which own or operate nuclear power plants
are exposed to risks inherent in the nuclear industry. These risks
include exposure to new requirements resulting from extensive
federal and state regulatory oversight, public controversy,
decommissioning costs, and spent fuel and radioactive waste
disposal issues. While nuclear power construction risks are no
longer of paramount concern, the emerging issue is radioactive
waste disposal. In addition, nuclear plants typically require
substantial capital additions and modifications throughout their
operating lives to meet safety, environmental, operational and
regulatory requirements and to replace and upgrade various
plant systems. The high degree of regulatory monitoring and
controls imposed on nuclear plants could cause a plant to be
out of service or on limited service for long periods. When a
nuclear facility owned by an investor-owned utility or a state or
local municipality is out of service or operating on a limited
service basis, the utility operator or its owners may be liable for
the recovery of replacement power costs. Risks of substantial
liability also arise from the operation of nuclear facilities and
from the use, handling, and possible radioactive emissions
associated with nuclear fuel. Insurance may not cover all types
or amounts of loss which may be experienced in connection with
the ownership and operation of a nuclear plant and severe
financial consequences could result from a significant accident
or occurrence. The Nuclear Regulatory Commission has
promulgated regulations mandating the establishment of funded
reserves to assure financial capability for the eventual
decommissioning of licensed nuclear facilities. These funds are
to be accrued from revenues in amounts currently estimated to
be sufficient to pay for decommissioning costs.
The ability of state and local joint power agencies to make
payments on bonds they have issued is dependent in large part
on payments made to them pursuant to power supply or similar
agreements. Courts in Washington, Oregon and Idaho have held
that certain agreements between the Washington Public Power
Supply System ("WPPSS") and the WPPSS participants are
unenforceable because the participants did not have the
authority to enter into the agreements. While these decisions
are not specifically applicable to agreements entered into by
public entities in other states, they may cause a reexamination of
the legal structure and economic viability of certain projects
financed by joint power agencies, which might exacerbate some
of the problems referred to above and possibly lead to legal
proceedings questioning the enforceability of agreements upon
which payment of these bonds may depend.
Single Family and Multi-Family Housing Obligations.
Multi-family housing revenue bonds and single family mortgage
revenue bonds are state and local housing issues that have been
issued to provide financing for various housing projects. Multi-
family housing revenue bonds are payable primarily from the
revenues derived from mortgage loans to housing projects for
low to moderate income families. Single-family mortgage
revenue bonds are issued for the purpose of acquiring from
originating financial institutions notes secured by mortgages on
residences.
Housing obligations are not general obligations of the issuer
although certain obligations may be supported to some degree
by Federal, state or local housing subsidy programs. Budgetary
constraints experienced by these programs as well as the failure
by a state or local housing issuer to satisfy the qualifications
required for coverage under these programs or any legal or
administrative determinations that the coverage of these
programs is not available to a housing issuer, probably will
<PAGE>result in a decrease or elimination of subsidies
available for payment of amounts due on the housing issuer's
obligations. The ability of housing issuers to make debt service
payments on their obligations will also be affected by various
economic and non-economic developments including, among
other things, the achievement and maintenance of sufficient
occupancy levels and adequate rental income in multi-family
projects, the rate of default on mortgage loans underlying single
family issues and the ability of mortgage insurers to pay claims,
employment and income conditions prevailing in local markets,
increases in construction costs, taxes, utility costs and other
operating expenses, the managerial ability of project managers,
changes in laws and governmental regulations and economic
trends generally in the localities in which the projects are
situated. Occupancy of multi-family housing projects may also
be adversely affected by high rent levels and income limitations
imposed under Federal, state or local programs.
All single family mortgage revenue bonds and certain multi-
family housing revenue bonds are prepayable over the life of the
underlying mortgage or mortgage pool, and therefore the
average life of housing obligations cannot be determined.
However, the average life of these obligations will ordinarily be
less than their stated maturities. Single-family issues are subject
to mandatory redemption in whole or in part from prepayments
on underlying mortgage loans; mortgage loans are frequently
partially or completely prepaid prior to their final stated
maturities as a result of events such as declining interest rates,
sale of the mortgaged premises, default, condemnation or
casualty loss. Multi-family issues are characterized by mandatory
redemption at par upon the occurrence of monetary defaults or
breaches of covenants by the project operator. Additionally,
housing obligations are generally subject to mandatory partial
redemption at par to the extent that proceeds from the sale of
the obligations are not allocated within a stated period (which
may be within a year of the date of issue). To the extent that
these obligations were valued at a premium when a Holder
purchased Units, any prepayment at par would result in a loss of
capital to the Holder and, in any event, reduce the amount of
income that would otherwise have been paid to Holders.
The tax exemption for certain housing revenue bonds
depends on qualification under Section 143 of the Internal
Revenue Code of 1986, as amended (the "Code"), in the case of
single family mortgage revenue bonds or Section 142(a)(7) of the
Code or other provisions of Federal law in the case of certain
multi-family housing revenue bonds (including Section 8 assisted
bonds). These sections of the Code or other provisions of
Federal law contain certain ongoing requirements, including
requirements relating to the cost and location of the residences
financed with the proceeds of the single family mortgage revenue
bonds and the income levels of tenants of the rental projects
financed with the proceeds of the multi-family housing revenue
bonds. While the issuers of the bonds and other parties,
including the originators and servicers of the single-family
mortgages and the owners of the rental projects financed with
the multi-family housing revenue bonds, generally covenant to
meet these ongoing requirements and generally agree to institute
procedures designed to ensure that these requirements are met,
there can be no assurance that these ongoing requirements will
be consistently met. The failure to meet these requirements
could cause the interest on the bonds to become taxable,
possibly retroactively from the date of issuance, thereby reducing
the value of the bonds, subjecting the Holders to unanticipated
tax liabilities and possibly requiring the Trustee to sell the bonds
at reduced values. Furthermore, any failure to meet these
ongoing requirements might not constitute an event of default
under the applicable mortgage or permit the holder to accelerate
payment of the bond or require the issuer to redeem the bond.
In any event, where the mortgage is insured by the Federal
Housing administration, its consent may be required before
insurance proceeds would become payable to redeem the
mortgage bonds.
<PAGE> Revenue Bonds of
Hospitals and Health Care Facilities. The ability of hospitals
and other health care facilities to meet their obligations with
respect to revenue bonds issued on their behalf is dependent on
various factors, including the level of payments received from
private third-party payors and government programs and the
costs of providing health care services.
A significant portion of the revenues of hospitals and other
health care facilities is derived from private third-party payors
and government programs, including the Medicare and Medicaid
programs. Both private third-party payors and government
programs have undertaken cost containment measures designed
to limit payments made to health care facilities. Furthermore,
government programs are subject to statutory and regulatory
changes, retroactive rate adjustments, administrative rulings and
government funding restrictions, all of which may materially
decrease the rate of program payments for health care facilities.
There can be no assurance that payments under governmental
programs will remain at levels comparable to present levels or
will, in the future, be sufficient to cover the costs allocable to
patients participating in such programs. In addition, there can
be no assurance that a particular hospital or other health care
facility will continue to meet the requirements for participation
in such programs.
The costs of providing health care services are subject to
increase as a result of, among other factors, changes in medical
technology and increased labor costs. In addition, health care
facility construction and operation is subject to federal, state and
local regulations relating to the adequacy of medical care,
equipment, personnel, operating policies and procedures, rate-
setting, and compliance with building codes and environmental
laws. Facilities are subject to periodic inspection by
governmental and other authorities to assure continued
compliance with the various standards necessary for licensing
and accreditation. These regulatory requirements are subject to
change and, to comply, it may be necessary for a hospital or
other health care facility to incur substantial capital expenditures
or increased operating expenses to effect changes in its facilities,
equipment, personnel and services.
Hospitals and other health care facilities are subject to
claims and legal actions by patients and others in the ordinary
course of business. Although these claims are generally covered
by insurance, there can be no assurance that a claim will not
exceed the insurance coverage of a health care facility or that
insurance coverage will be available to a facility. In addition, a
substantial increase in the cost of insurance could adversely
affect the results of operations of a hospital or other health care
facility. The Clinton Administration may impose regulations
which could limit price increases for hospitals, the level of
reimbursements for third-party payors or other measures to
reduce health care costs and make health care available to more
individuals, which would reduce profits for hospitals. Some
states, such as New Jersey, have significantly changed their
reimbursement systems. If a hospital cannot adjust to the new
system by reducing expenses or raising rates, financial difficulties
may arise. Also, Blue Cross has denied reimbursements for
some hospitals for services other than emergency room services.
The lost volume would reduce revenue unless replacement
patients were found.
Certain hospital bonds may provide for redemption at par
at any time upon the sale by the issuer of the hospital facilities
to a nonaffiliated entity or in other circumstances. For example,
certain hospitals may have the right to call bonds at par if the
hospital may legally be required because of the bonds to perform
procedures against specified religious principles. Certain FHA-
insured bonds may provide that all or a portion of those bonds,
otherwise callable at a premium, can be called at par in certain
circumstances. If a hospital defaults upon a bond obligation, the
<PAGE>realization of Medicare and Medicaid receivables may
be uncertain and, if the bond obligation is secured by the
hospital facilities, legal restrictions on the ability to foreclose
upon the facilities and the limited alternative uses to which a
hospital can be put may reduce severely its collateral value.
The Internal Revenue Service is currently engaged in a
program of intensive audits of certain large tax-exempt hospital
and health care facility organizations. Although these audits
have not yet been completed, it has been reported that the tax-
exempt status of some of these organizations may be revoked.
At this time, it is uncertain whether any of the hospital and
health care facility obligations held by the Trust will be affected
by such audit proceedings.
Lease Rental Obligations. Lease rental obligations are
issued for the most part by governmental authorities that have
no taxing power or other means of directly raising revenues.
Rather, the authorities are financing vehicles created solely for
the construction of buildings (administrative offices, convention
centers and prisons, for example) or the purchase of equipment
(police cars and computer systems, for example) that will be
used by a state or local government (the "lessee"). Thus, the
obligations are subject to the ability and willingness of the lessee
government to meet its lease rental payments which include debt
service on the obligations. Lease rental obligations are subject,
in almost all cases, to the annual appropriation risk, i.e., the
lessee government is not legally obligated to budget and
appropriate for the rental payments beyond the current fiscal
year. These obligations are also subject to the risk of abatement
in many states -- rental obligations cease in the event that
damage, destruction or condemnation of the project prevents its
use by the lessee. (In these cases, insurance provisions designed
to alleviate this risk become important credit factors.) In the
event of default by the lessee government, there may be
significant legal and or practical difficulties involved in the re-
letting or sale of the project. Some of these issues, particularly
those for equipment purchase, contain the so-called "substitution
safeguard", which bars the lessee government, in the event it
defaults on its rental payments, from the purchase or use of
similar equipment for a certain period of time. This safeguard
is designed to insure that the lessee government will appropriate
necessary funds even though it is not legally obligated to so do,
but its legality remains untested in most, if not all, states.
Facility Revenue Bonds Dependent on User Fees. Certain
facility revenue bonds are payable from and secured by the
revenues from the ownership and operation of particular
facilities, such as airports (including airport terminals and
maintenance facilities) marine terminals, bridges, turnpikes and
port authorities. For example, the major portion of gross airport
operating income is generally derived from fees received from
signatory airlines pursuant to use agreements which consist of
annual payments for airport use, occupancy of certain terminal
space, facilities, service fees, concessions and leases. Airport
operating income may therefore be affected by the ability of the
airlines to meet their obligations under the use agreements. The
air transport industry is experiencing significant variations in
earnings and traffic, due to increased competition, excess
capacity, increased aviation fuel and other costs, deregulation,
traffic constraints, the current recession and other factors. As a
result, several airlines are experiencing severe financial
difficulties. Several airlines including Trans World Airlines, Inc.,
Continental Airlines, Inc., and Braniff International Inc., have
sought protection from their creditors under Chapter 11 of the
Bankruptcy Code. In addition, other airlines, such as Pan
American Corporation and Midway Airlines, Inc. have recently
been liquidated. The Sponsor cannot predict what effect these
industry conditions may have on airport revenues which are
dependent for payment on the financial condition of the airlines
and their usage of the particular airport facility.
<PAGE>
Similarly, payment on bonds related to other facilities is
dependent on revenues from the projects, such as user fees from
ports, tolls on turnpikes and bridges and rents from buildings.
Therefore, payment may be adversely affected by reduction in
revenues due to such factors as increased cost of maintenance or
decreased use of a facility, lower cost of alternative modes of
transportation or scarcity of fuel and reduction or loss of rents.
Solid Waste Disposal Bonds. Bonds issued for solid waste
disposal facilities are generally payable from user fees and from
revenues that may be earned by the facility on the sale of
electrical energy generated in the combustion of waste products.
The ability of solid waste disposal facilities to meet their
obligations depends upon the continued use of the facility, the
successful and efficient operation of the facility and the
continued ability of the facility to generate electricity on a
commercial basis. All of these factors may be affected by a
failure of municipalities to fully utilize the facilities, an
insufficient supply of waste for disposal due to economic or
population decline, rising construction and maintenance costs,
any delays in construction of facilities and lower-cost alternative
modes of waste processing. Because of the relatively short
history of this type of financing, there may be technological risks
involved in the satisfactory construction or operation of the
projects exceeding those associated with most municipal
enterprise projects. Increasing environmental regulation on the
federal, state and local level has a significant impact on waste
disposal facilities. While regulation requires more waste
producers to use waste disposal facilities, it also imposes
significant costs on the facilities. These costs include compliance
with frequently changing and complex regulatory requirements,
the cost of obtaining construction and operating permits, the cost
of conforming to prescribed and changing equipment standards
and required methods of operation and the cost of disposing of
the waste residue that remains after the disposal process in an
environmentally safe manner. In addition, waste disposal
facilities frequently face substantial opposition by environmental
groups and officials to their location and operation, to the
possible adverse effects upon the public health and the
environment that may be caused by wastes disposed of at the
facilities and to alleged improper operating procedures. Waste
disposal facilities benefit from laws which require waste to be
disposed of in a certain manner but any relaxation of these laws
could cause a decline in demand for the facilities' services.
Finally, waste disposal facilities are concerned with many of the
same issues facing utilities insofar as they derive revenues from
the sale of energy to local power utilities (see the discussion of
Utility Obligations above).
Special Tax Bonds. Special tax bonds are payable from and
secured by the revenues derived by a municipality from a
particular tax such as a tax on the rental of a hotel room, on the
purchase of food and beverages, on the rental of automobiles or
on the consumption of liquor. Special tax bonds are not secured
by the general tax revenues of the municipality, and they do not
represent general obligations of the municipality. Therefore,
payment on special tax bonds may be adversely affected by a
reduction in revenues realized from the underlying special tax
due to a general decline in the local economy or population or
due to a decline in the consumption, use or cost of the goods
and services that are subject to taxation. Also, should spending
on the particular goods or services that are subject to the special
tax decline, the municipality may be under no obligation to
increase the rate of the special tax to ensure that sufficient
revenues are raised from the shrinking taxable base.
Transit Authority Obligations. Mass transit is generally not
self-supporting from fare revenues. Therefore, additional
financial resources must be made available to ensure operation
of mass transit systems as well as the timely payment of debt
service. Often such financial resources <PAGE>include
Federal and state subsidies, lease rentals paid by funds of the
state or local government or a pledge of a special tax such as a
sales tax or a property tax. If fare revenues or the additional
financial resources do not increase appropriately to pay for rising
operating expenses, the ability of the issuer to adequately service
the debt may be adversely affected.
Water and Sewer Revenue Bonds. Water and sewer bonds
are generally payable from user fees. The ability of state and
local water and sewer authorities to meet their obligations may
be affected by failure of municipalities to utilize fully the
facilities constructed by these authorities, economic or
population decline and resulting decline in revenue from user
charges, rising construction and maintenance costs and delays in
construction of facilities, impact of environmental requirements,
failure or inability to raise user charges in response to increased
costs, the difficulty of obtaining or discovering new supplies of
fresh water, the effect of conservation programs and the impact
of "no growth" zoning ordinances. In some cases this ability may
be affected by the continued availability of Federal and state
financial assistance and of municipal bond insurance for future
bond issues.
Revenue Obligations of Universities and Colleges. The
ability of universities and colleges to meet their obligations is
dependent upon various factors, including the size and diversity
of their sources of revenues, enrollment, reputation,
management expertise, the availability and restrictions on the use
of endowments and other funds, the quality and maintenance
costs of campus facilities, and, in the case of public institutions,
the financial condition of the relevant state or other
governmental entity and its policies with respect to education.
The institution's ability to maintain enrollment levels will depend
on such factors as tuition costs, geographic location, geographic
diversity and quality of the student body, quality of the faculty
and the diversity of program offerings. Statistics and projections
developed by the Center for Education Statistics, a unit within
the United States Department of Education's Office of
Education Research and Improvement, indicate that enrollment
in postsecondary education institutions peaked in 1983, declined
in 1984 and increased in 1985, 1986 and 1987, and is expected to
increase in the next several years. On the other hand, a study
performed by the Western Interstate Commission for Higher
Education in 1984 projects a steady decline in the number of
high school graduates nationally through 1992, falling from
projected levels of 2.54 million in 1987 to 2.29 million in 1992.
This latter study forecasts a return by 1998 to projected 1987
levels of high school graduates.
Legislative or regulatory action in the future at the Federal,
state or local level may directly or indirectly affect eligibility
standards or reduce or eliminate the availability of funds for
certain types of student loans or grant programs, including
student aid, research grants and work-study programs, and may
affect indirect assistance for education.
Litigation and Legislation
To the best knowledge of the Sponsor, there was no
litigation pending as of the Date of Deposit with respect to any
Debt Obligations that might reasonably be expected to have a
material adverse effect upon the Trust. At any time litigation
may be initiated on a variety of grounds with respect to the Debt
Obligations. Litigation, for example, challenging the issuance of
pollution control revenue bonds under recently-enacted
environmental protection statutes may affect the validity of Debt
Obligations or the tax-free nature of their interest. While the
outcome of litigation of this nature can never be entirely
predicted, opinions of bond counsel are delivered on the date of
issuance of each Debt Obligation to the effect that the Debt
Obligation has been validly issued and that the
<PAGE>interest thereon is exempt from Federal income tax.
In addition, other factors may arise from time to time which
potentially may impair the ability of issuers to make payments
due on Debt Obligations.
Under the Federal Bankruptcy Act, a political subdivision
or public agency or instrumentality of any state, including
municipalities, may proceed to restructure or otherwise alter the
terms of its obligations, including those of the type of which the
Trust is comprised. The Sponsor is unable to predict what
effect, if any, this legislation will have on the Trust.
From time to time Congress considers proposals to tax the
interest on State and local obligations, such as the Debt
Obligations. The Supreme Court clarified in South Carolina v.
Baker (decided April 20, 1988) that the U.S. Constitution does
not prohibit Congress from passing a non-discriminatory tax on
State and local obligations. This type of legislation, if enacted
into law, could adversely affect an investment in Units. Holders
are urged to consult their own tax advisors.
DESCRIPTION OF THE TRUST
Payment of the Securities and Life of the Trust
Because certain of the Securities from time to time may be
redeemed or prepaid or will mature in accordance with their
terms or may be sold under certain circumstances described
herein, no assurance can be given that the Trust will retain for
any length of time its present size and composition (see
Redemption). Many of the Securities may be subject to
redemption prior to their stated maturity dates pursuant to
optional refunding or sinking fund redemption provisions or
otherwise. In general, optional refunding redemption provisions
are more likely to be exercised when the offering side evaluation
is at a premium over par than when it is at a discount from par.
Generally, the offering side evaluation of Securities will be at a
premium over par when market interest rates fall below the
coupon rate on the Securities. The percentage of the face
amount of Securities in the Portfolio which were at a bid side
evaluation in excess of par is set forth under Investment
Summary. Certain Securities in the Portfolio may be subject to
sinking fund provisions. These provisions are designed to
redeem a significant portion of an issue gradually over the life
of the issue; obligations to be redeemed are generally chosen by
lot. The Portfolio contains a listing of the sinking fund and
optional redemption provisions with respect to the Securities.
Tax Exemption
In the opinion of bond counsel rendered on the date of
issuance of each Security, the interest on the Securities is
excludable from gross income under then existing law for regular
Federal income tax purposes (except in certain circumstances
depending on the Holder) but may be subject to state and local
taxes and may be a preference item for purposes of the
alternative minimum tax. As discussed under Description of the
Trust--Taxes, interest on some or all of the Securities may
become subject to regular Federal income tax, perhaps
retroactively to their date of issuance, as a result of changes in
Federal law or as a result of the failure of issuers (or other users
of the proceeds of the municipal organizations) to comply with
certain ongoing requirements.
The Internal Revenue Service announced on June 14, 1993
that it will be expanding its examination program with respect to
tax-exempt bonds. The expanded examination program will
consist of, among other measures, increased enforcement against
abusive transactions, broader audit <PAGE>coverage (including
the expected issuance of audit guidelines) and expanded
compliance achieved by means of expected revisions to the tax-
exempt bond information return forms. At this time, it is
uncertain whether the tax exempt status of any of the Debt
Obligations would be affected by the expanded examination
program, or whether such effect, if any, would be retroactive.
In certain cases, a Security may provide that if the interest
on the Security should ultimately be determined to be taxable,
the Security would become due and payable by its issuer, and, in
addition, may provide that any related letter of credit or other
security could be called upon if the issuer failed to satisfy all or
part of its obligation. In other cases, however, a Security may
not provide for the acceleration or redemption of the Security or
a call upon the related letter of credit or other security upon a
determination of taxability. In those cases in which a Security
does not provide protection from a determination of taxability
or in which both the issuer and the bank or other entity issuing
the letter of credit or other security are unable to meet their
obligations to pay the amounts due on the Security as a result of
a determination of taxability, the Trustee would be obligated to
sell the Security and, since it would be sold as a taxable security,
it is expected that it would have to be sold at a substantial
discount from current market price. In addition, as mentioned
above, Holders might be required to pay income tax on interest
received prior to the date of the determination of taxability.
The Portfolio
The Portfolio contains different issues of municipal debt
obligations with fixed final maturity dates, which on the Date of
Deposit were either rated in the category B or better by either
Standard & Poor's or Moody's or had, in the opinion of the
Sponsor, comparable credit characteristics. As used herein the
term "Securities" means the debt obligations initially deposited
in the Trust and described under Portfolio and any substitute
Securities acquired and held by the Trust pursuant to the
provisions of the Indenture (see Administration of the Trust--
Trust Supervision). See Investment Summary for a summary of
particular matters relating to the Portfolio.
In selecting Securities for deposit in the Trust, the Sponsor
considered the following factors, among others: (i) whether the
Securities were rated in the category B or better by Standard &
Poor's or Moody's or, if unrated, had, in the opinion of the
Sponsor, comparable credit characteristics, (ii) the yield and
price of the Securities relative to other comparable debt
securities, (iii) the diversification of the Portfolio as to various
classifications, taking into account the availability in the market
of issues which meet the Trust's criteria. Subsequent to the Date
of Deposit, a Security may cease to be rated by Standard &
Poor's or Moody's or its rating or ranking may be reduced.
Neither event requires elimination of that Security from the
Portfolio, but may be considered in the Sponsor's determination
to direct the disposal of the Security (see Administration of the
Trust--Trust Supervision).
The Sponsor has the power but not the obligation to direct
the disposition of Debt Obligations upon institution of certain
legal proceedings, default under certain documents adversely
affecting future declaration or payment of anticipated interest,
or a substantial decline in price or the occurrence of other
materially adverse market or credit factors, that in the opinion
of the Sponsor would make the retention of such Debt
Obligations detrimental to the interests of the Holders (Section
3.09).
<PAGE> The yields on debt
obligations of the type deposited in the Trust are dependent on
a variety of factors, including general money market conditions,
general conditions of the municipal bond market, size of a
particular offering, the maturity of the obligation and rating of
the issue. The ratings represent the opinions of the rating
organizations as to the quality of the debt obligations which they
undertake to rate. It should be emphasized, however, that
ratings are general and are not absolute standards of quality.
Investors should be aware that credit ratings of debt securities
evaluate the ability of the issuer to pay interest and principal but
do not evaluate the risk of decline in the market value of the
debt securities for other reasons. Consequently, debt obligations
with the same maturity, coupon and rating may have different
yields, while debt obligations of the same maturity and coupon
with different ratings may have the same yield.
The Trust consists of the Securities listed under Portfolio
(including any substitute debt obligations deposited in the Trust
pursuant to the terms of the Indenture) as long as they may
continue to be held from time to time in the Trust together with
accrued and undistributed interest thereon and undistributed and
uninvested cash realized from the disposition or redemption of
Securities (see Administration of the Trust--Trust Supervision).
Income; Estimated Current Return; Estimated Long-Term
Return
The estimated net annual interest rate per 1,000 Units on
the Evaluation Date is set forth under Investment Summary.
This rate shows the percentage return based on face amount per
1,000 Units after deducting estimated annual fees and expenses
expressed as a percentage and assumes the timely payment of all
interest. This rate will change as Securities mature, are
exchanged, redeemed, paid or sold or as the expenses of the
Trust change.
Normally, interest on the Securities in the Trust is paid on
a semi-annual (or less frequently, annual) basis. Because
interest on the Securities is not received by the Trust at a
constant rate throughout the year, any Monthly Income
Distribution may be more or less than the interest actually
received by the Trust. In order to eliminate fluctuations, the
Trustee is required to advance the amounts necessary to provide
approximately equal Monthly Income Distributions. The Trustee
will be reimbursed, without interest, for these advances from
interest received on the Securities.
In addition to the Public Offering Price, the price of a Unit
includes accrued interest on the Securities. Because of the
varying payment dates of the Securities, accrued interest at any
time will be greater than the amount of interest actually received
by the Trust and distributed to Holders. Therefore, accrued
interest (if any) is always added to the value of the Units. If a
Holder sells all or a portion of his Units, he will receive his
proportionate share of the accrued interest from the purchaser
of his Units. Similarly, if a Holder redeems all or a portion of
his Units, the Redemption Price per Unit will include accrued
interest on the Securities.
Interest on the Securities in the Trust, less estimated fees
of the Trustee and Sponsor and certain other expenses, is
expected to accrue at the daily rate (based on a 360-day year)
shown under Investment Summary. The actual daily rate will
vary as Securities are exchanged, redeemed, paid or sold or as
the expenses of the Trust change.
Estimated Current Return and Estimated Long Term
Return give different information about the return to investors.
Estimated Current Return on a Unit represents annual cash
receipts from <PAGE>coupon-bearing debt obligations in the
Portfolio (after estimated annual expenses) divided by the Public
Offering Price (including the sales charge).
Unlike Estimated Current Return, Estimated Long Term
Return is a measure of the estimated return to the investor
earned over the estimated life of the Trust. The Estimated Long
Term Return represents an average of the yields to maturity (or
earliest call date for obligations trading at prices above the
particular call price) of the Debt Obligations in the Portfolio,
calculated in accordance with accepted bond practice and
adjusted to reflect expenses and sales charges. Under accepted
bond practice, bonds are customarily offered to investors on a
"yield price" basis, which involves computation of yield to
maturity (or earlier call date), and which takes into account not
only the interest payable on the bonds but also the amortization
or accretion to a specified date of any premium over or discount
from the par (maturity) value in the bond's purchase price. In
calculating Estimated Long Term Return, the average yield for
the Portfolio is derived by weighting each Debt Obligation's yield
by the market value of the Debt Obligation and by the amount
of time remaining to the date to which the Debt Obligation is
priced. Once the average Portfolio yield is computed, this figure
is then adjusted for estimated expenses and the effect of the
maximum sales charge paid by investors. The Estimated Long
Term Return calculation does not take into account certain
delays in distributions of income and the timing of other receipts
and distributions on Units and may, depending on maturities,
over or understate the impact of sales charges. Both of these
factors may result in a lower figure.
Both Estimated Current Return and Estimated Long Term
Return are subject to fluctuation with changes in Portfolio
composition (including the redemption, sale or other disposition
of Debt Obligations in the Portfolio), changes in market value
of the underlying Debt Obligations and changes in fees and
expenses, including sales charges. The size of any difference
between Estimated Current Return and Estimated Long Term
Return can also be expected to fluctuate at least as frequently.
In addition, both return figures may not be directly comparable
to yield figures used to easure other investments, and since the
return figures are based on certain assumptions and variables the
actual returns received by a Unitholder may be higher or lower.
The Public Offering Price of Units will vary in accordance
with fluctuations in the prices of the Securities and the
applicable sales charges. Any change in either the net annual
interest rate per Unit or the Public Offering Price will result in
a change in the current return.
TAXES
The following discussion addresses only the tax
consequences of Units held as capital assets and does not
address the tax consequences of Units held by dealers, financial
institutions or insurance companies.
On the Date of Deposit for the Trust, Davis Polk &
Wardwell, special counsel for the Sponsor, rendered an opinion
under then existing law substantially to the effect that:
The 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 in the manner
set forth below.
<PAGE> Each Holder will
be considered the owner of a pro rata portion of each Debt
Obligation in the Trust under the grantor trust rules of Sections
671-679 of the Internal Revenue Code of 1986, as amended (the
"Code"). The total cost to a Holder of his Units, including sales
charges, is allocated among his pro rata portion of each Security
(in proportion to the fair market values thereof on the date the
Holder purchases his Units) in order to determine his tax cost
for his pro rata portion of each Security.
Each Holder will be considered to have received the interest
on his pro rata portion of each Debt Obligation when interest on
the Debt Obligation is received by the Trust. In the opinion of
bond counsel (delivered on the date of issuance of the Debt
Obligation), such interest will be excludable from gross income
for regular Federal income tax purposes (except in certain
limited circumstances referred to below). Amounts received by
the Trust pursuant to a bank letter of credit, guarantee or
insurance policy with respect to payments of principal, premium
or interest on a Debt Obligation will be treated for Federal
income tax purposes in the same manner as if such amounts
were paid by the issuer of the Debt Obligation.
The Trust may contain Debt Obligations which were
originally issued at a discount ("original issue discount"). In
general, original issue discount is defined as the difference
between the price at which a debt obligation was issued and its
stated redemption price at maturity. Original issue discount on
a tax-exempt obligation issued after September 3, 1982, and
acquired after March 1, 1984, is deemed to accrue as tax-exempt
interest over the life of the obligation under a formula based on
the compounding of interest. Original issue discount on a tax-
exempt obligation issued before July 1, 1982 is deemed to accrue
as tax-exempt interest ratably over the life of the obligation.
Original issue discount on any other tax-exempt obligation is also
deemed to accrue as tax-exempt interest over the life of the
obligation, although it is not clear whether such accrual is ratable
or is determined under a formula based on the compounding of
interest. If a Holder's tax cost for his pro rata portion of a Debt
Obligation issued with original issue discount is greater than the
"revised issue price" thereof but less than its stated redemption
price at maturity, the Holder will be considered to have
purchased his pro rata portion of the Debt Obligation at an
"acquisition premium". Increases to the Holder's tax basis in his
pro rata portion of the Debt Obligation resulting from the
accrual of original issue discount will be reduced by the amount
of such acquisition premium. The above principles will apply to
each Holder's pro rata portion of any Debt Obligation originally
issued at a discount.
If a Holder's tax cost for his pro rata portion of a Debt
Obligation exceeds the redemption price at maturity thereof, the
Holder will be considered to have purchased his pro rata portion
of the Debt Obligation at a "premium". The Holder is required
to amortize the premium prior to the maturity of the Debt
Obligation. Such amortization is only an adjustment to basis (i.e.,
a reduction of the Holder's tax cost) for his pro rata portion of
the Debt Obligation and does not result in any deduction against
the Holder's income. Therefore, under some circumstances, a
Holder may recognize taxable gain when his pro rata portion of
a Debt Obligation is disposed of for an amount equal to or less
than his original tax cost therefor.
A Holder will recognize taxable gain or loss when all or part
of his pro rata portion of a Debt Obligation is disposed of for an
amount greater or less than his original tax cost therefor plus
any accrued original issue discount or minus any amortized
premium. Under current law, any gain recognized on the
disposition of a Holder's pro rata portion of a Debt Obligation
will be capital gain. However, under legislation currently
pending in the U.S. Congress, any gain from the disposition
<PAGE>of a Holder's pro rata portion of a Debt Obligation
acquired by the Holder at a "market discount" (i.e., where the
Holder's original cost for his pro rata portion of the Debt
Obligation (plus any original issue discount which will accrue
thereon until its maturity) is less than its stated redemption price
at maturity) would be treated as ordinary income to the extent
the gain does not exceed the accrued market discount
attributable to the period during which the Holder is treated as
owning such Debt Obligation. 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. Moreover, under the currently pending
legislation, the maximum rate of income tax on ordinary income
for noncorporate taxpayers would be increased to 36 percent,
subject to a 10% surtax on incomes over $250,000. Under such
legislation, the maximum rate for net long-term gain over net
short-term capital loss would remain at 28 percent, subject to a
10% surtax on incomes over $250,000. 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 be considered to have
disposed of all or part of his pro rata portion of each Debt
Obligation when he sells or redeems all or some of his Units or
when all or part of the Debt Obligation is sold by the Trust or
is redeemed or paid at maturity.
Under Section 265 of the Code, a Holder (except a
corporate Holder) will not be entitled to deduct his pro rata
share of fees and expenses of the Trust because the fees and
expenses are incurred in connection with the production of tax-
exempt income. Further, if borrowed funds are used by a
Holder to purchase or carry Units, interest on this indebtedness
will not be deductible for Federal income tax purposes. In
addition, under rules used by the Internal Revenue Service, the
purchase of Units may be considered to have been made with
borrowed funds even though the borrowed funds are not directly
traceable to the purchase of Units.
Under the income tax laws of the State and City of New
York, the Trust is not an association taxable as a corporation
and income received by the Trust will be treated as the income
of the Holders in the same manner as for Federal income tax
purposes, but will not necessarily be tax-exempt.
From time to time proposals are introduced in Congress
and State legislatures which, if enacted into law, could have an
adverse impact on the tax-exempt status of Debt Obligations. It
is impossible to predict whether any legislation in respect of the
tax status of interest on such obligations may be proposed and
eventually enacted at the Federal or state level.
The foregoing discussion relates only to Federal and New
York State and City income taxes. Holders may be subject to
state and local taxation in New York or in other jurisdictions
and should consult their own tax advisers in this regard.
* * *
The Trust may include Debt Obligations issued after August
7, 1986. Interest on certain of these Debt Obligations (including
any original issue discount) is a preference item for purposes of
the alternative minimum tax ("AMT") for individuals and
corporations. See Investment Summary and Portfolio. In
addition, a corporate holder should be aware that the accrual
or receipt of tax-exempt interest not otherwise subject to the
AMT nonetheless may give rise to an alternative minimum tax
liability (or increase an existing liability) because the interest
income will be included <PAGE>in the corporation's "adjusted
current earnings" for purposes of the adjustment to alternative
minimum taxable income required by Section 56(g) of the Code,
and will be taken into account for purposes of the environmental
tax on corporations under Section 59A of the Code, which is
based on alternative minimum taxable income. In addition,
interest on the Debt Obligations must be taken into
consideration in computing the portion, if any, of social security
benefits that will be included in an individual's gross income
and subject to Federal income tax. Holders are urged to
consult their own tax advisers concerning an investment in Units.
At the time of issuance of each Debt Obligation, an opinion
relating to the validity of the Debt Obligation and to the
exemption of interest thereon from regular Federal income taxes
was or will be rendered by bond counsel. Neither the Sponsor
nor Davis Polk & Wardwell have made or will make any review
of the proceedings relating to the issuance of the Debt
Obligations or the basis for these opinions. In the case of
certain Debt Obligations, the tax exemption is dependent upon
the issuer's (and other users') compliance with certain ongoing
requirements, and the opinion of bond counsel assumes that
these requirements will be complied with. However, there can be
no assurance that the issuer (and other users) will comply with
these requirements, in which event the interest on the Debt
Obligation could be determined to be taxable, in most cases
retroactively from the date of issuance.
In the case of certain of the Debt Obligations, the opinions
of bond counsel indicate that interest on these Debt Obligations
received by a "substantial user" of the facilities being financed
with the proceeds of these Debt Obligations, or persons related
thereto, for periods while these Debt Obligations are held by
such a user or related person, will not be exempt from regular
Federal income taxes, although interest on these Debt
Obligations received by others would be exempt from regular
Federal income taxes. "Substantial user" is defined under U.S.
Treasury Regulations to include only a person whose gross
revenue derived with respect to the facilities financed by the
issuance of bonds is more than 5% of the total revenue derived
by all users of these facilities, or who occupies more than 5% of
the usable area of these facilities or for whom these facilities or
a part thereof were specifically constructed, reconstructed or
acquired. "Related persons" are defined to include certain
related natural persons, affiliated corporations, partners and
partnerships.
After the end of each calendar year, the Trustee will furnish
to each Holder an annual statement containing information
relating to the interest received by the Trust on the Debt
Obligations, the gross proceeds received by the Trust from the
disposition of any Debt Obligation (resulting from redemption
or payment at maturity of any Debt Obligation or the sale by the
Trust of any Debt Obligation), and the fees and expenses paid
by the Trust. The Trustee will also furnish annual information
returns to each Holder and to the Internal Revenue Service.
Holders are required to report to the Internal Revenue Service
the amount of tax-exempt interest received during the year.
PUBLIC SALE OF UNITS
Public Offering Price
The Public Offering Price of the Units is computed by
adding to the bid side evaluation of the Securities (as
determined by the Evaluator), divided by the number of Units
outstanding, the sales charge at the applicable percentage of the
bid side evaluation per Unit. A proportionate share of accrued
and undistributed interest on the Securities to the date of
delivery of the Units to the purchaser is added to the Public
Offering Price. The Public Offering Price on the date of this
<PAGE>Prospectus or on any subsequent date will vary from
the Public Offering Price on the Evaluation Date (set forth
under Investment Summary) in accordance with fluctuations in
the aggregate bid side evaluation of the underlying Securities.
The applicable percentage of sales charge and the
concession to dealers referred to below under Public
Distribution is reduced on a graduated scale for sales to any
purchaser of at least 100,000 Units and will be applied on
whichever basis is more favorable to the purchaser. Sales charges
are as follows:
Sales Charge Sales
Charge
as Percent of as
Percent of
Bid Side Public Net
Amount
Number of Units Offering Price Invested
1,000-99,999. . . . . . . . . . . . . 5.50% 5.820%
100,000-249,999 . . . . . . . . . . . 5.00 5.263
250,000-499,999 . . . . . . . . . . . 4.50 4.172
500,000-999,999 . . . . . . . . . . . 4.00 4.167
1,000,000 or more . . . . . . . . . . 3.50 3.627
The above graduated sales charges will apply on
all purchases on any one day by the same purchaser of
Units only in the amounts stated. For this purpose
purchases of one or more Series sponsored by the
Sponsor that have the same rates of sales charge will be
aggregated with concurrent purchases of any other unit
trusts sponsored by the Sponsor. Units held in the name
of the spouse of the purchaser or in the name of a child
of the purchaser under 21 years of age are deemed to be
registered in the name of the purchaser. The graduated
sales charges are also applicable to a trustee or other
fiduciary purchasing securities for a single trust estate or
single fiduciary account.
Employees of the Sponsor and its affiliates may
purchase Units of this Trust at a price equal to the bid
side evaluation of the Securities, divided by the number
of Units outstanding, plus a reduced sales charge of
1.5%.
The aggregate bid side evaluations of the
Securities are determined by the Evaluator, taking into
account the same factors referred to under Redemption-
- -Computation of Redemption Price per Unit. This
determination is made each business day as of the
Evaluation Time set forth under Investment Summary,
effective for all sales made since the last of these
evaluations. The term "business day", as used herein and
under "Redemption", shall exclude Saturdays, Sundays
and the following holidays as observed by the New York
Stock Exchange: New Year's Day, Washington's
Birthday, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving and Christmas.
Comparison of Public Offering Price,
Sponsor's Repurchase Price and Redemption Price
On the Evaluation Date, the Public Offering
Price per 1,000 Units (which includes the sales charge)
exceeded the Sponsor's Repurchase Price and the
Redemption Price per 1,000 Units by the amount set
forth under Investment Summary.
<PAGE> In the past, the bid prices of publicly
offered issues of "high yield" bonds have been lower than
the offering prices by as much as 1.50% or more of face
amount in the case of inactively traded issues and as
little as .25% in the case of actively traded issues, but
the difference between the offering and bid prices has
averaged about 1.00% of face amount. For this and
other reasons (including fluctuations in the market
prices of the Securities, and the fact that the Public
Offering Price includes the sales charge), the amount
realized by a Holder upon any redemption of Units may
be less than the price paid by him for the Units.
Public Distribution
Units may be offered directly to the public by
this Prospectus at the Public Offering Price determined
in the manner provided above.
The Sponsor has qualified Units in all states in
the U.S. in which qualification is deemed necessary for
sale by itself and by dealers who are members of the
National Association of Securities Dealers, Inc. Sales to
individuals in California are restricted to persons who
have (i) annual income of at least $30,000 and a net
worth of at least $30,000, exclusive of home, home
furnishings and automobiles or (ii) net worth of at least
$75,000, exclusive of home, home furnishings and
automobiles. The Sponsor does not intend to qualify
Units for sale in any foreign countries and this
Prospectus does not constitute an offer to sell Units in
any country where Units cannot lawfully be sold. Sales
to dealers, if any, will initially be made at prices which
represent a concession of the amount per 1,000 Units
specified in the table above, but the Sponsor reserves the
right to change the amount of the concession to dealers
from time to time. Any dealer may reallow a concession
not in excess of the concession to dealers.
Sponsor's Profits
Upon sale of the Units, the Sponsor will receive
sales charges at the rates set forth in the table above.
Cash, if any, made available by buyers of Units to the
Sponsor prior to the settlement date for purchase of
Units 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. In maintaining a market for the Units (see
Market for Units), the Sponsor will also realize profits
or sustain losses in the amount of any difference
between the prices at which it buys Units and the prices
at which it resells these Units (which include the sales
charge) or the prices at which it redeems the Units
(based on the bid side evaluation of the Securities), as
the case may be.
MARKET FOR UNITS
Although the Sponsor is not obligated to do so,
it intends to maintain a secondary market for Units of
this Series and continuously to offer to purchase Units
of this Series at prices, subject to change at any time,
which will be computed on the basis of the bid side of
the market, taking into account the same factors referred
to in determining the bid side evaluation of Securities
for purposes of redemption (see Redemption). The
Sponsor may discontinue purchases of Units of this
Series should the supply of Units exceed demand or for
other business reasons. In this event the Sponsor may
nonetheless under certain circumstances purchase Units,
as a service to Holders, at prices based on the current
redemption prices for those Units (see Redemption).
The Sponsor, of course, does <PAGE>not in any way
guarantee the enforceability, marketability or price of
any Securities in the Portfolio or of the Units.
The Sponsor may redeem any Units it has
purchased in the secondary market if it determines that
it is undesirable to continue to hold these Units in its
inventory. Factors which the Sponsor will consider in
making this determination will include the number of
units of all series of all trusts that it holds in its
inventory, the saleability of the units and its estimate of
the time required to sell the units and general market
conditions. For a description of certain consequences of
any redemption for remaining Holders, see Redemption.
Holders who wish to dispose of their Units
should inquire of the Trustee or their bank or broker as
to current market prices in order to determine if there
exist over-the-counter prices in excess of the redemption
price and the repurchase price.
REDEMPTION
Although it is anticipated that Units in most
cases can be sold in the over-the-counter market at a
price per 1,000 Units that will at least equal the
Redemption Price per 1,000 Units (see Market for
Units), Units may be redeemed at the office of the
Trustee upon delivery on any business day, as defined
under Public Sale of Units--Public Offering Price, of a
request for redemption, and payment of any relevant tax,
without any other fee (Section 5.02). In certain
instances the Trustee may require additional documents
including, but not limited to, trust instruments,
certificates of death, appointments as executor or
administrator or certificates of corporate authority.
On the seventh calendar day following the
tender (or if the seventh calendar day is not a business
day on the first business day prior thereto), the Holder
will be entitled to receive the proceeds of the
redemption in an amount per 1,000 Units equal to the
Redemption Price per 1,000 Units (see below) as
determined as of the Evaluation Time next following the
tender. So long as the Sponsor is maintaining a market
at prices equal to or in excess of the Redemption Price
per 1,000 Units, the Sponsor will repurchase any Units
tendered for redemption no later than the close of
business on the second business day following the tender
(see Market for Units). The Trustee is authorized in its
discretion, if the Sponsor does not elect to repurchase
any Units tendered for redemption or if the Sponsor
tenders Units for redemption, to sell the Units in the
over-the-counter market at prices which will return to
the Holder a net amount in cash equal to or in excess of
the Redemption Price per 1,000 Units for the Units
(Section 5.02).
The Trustee is empowered to sell Securities in
order to make funds available for redemption (Section
5.02) if funds are not otherwise available in the Capital
and Income Accounts to meet redemptions (see
Administration of the Trust--Accounts and
Distributions). The Securities to be sold will be selected
from a list supplied by the Sponsor. Securities will be
chosen for this list by the Sponsor on the basis of those
market and credit factors as it may determine are in the
best interests of the Trust. 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.
To the extent that Securities are sold, the size
and diversity of the Trust will be reduced. Sales will
usually be required at a time when Securities would not
otherwise be sold and may result in lower prices than
might otherwise be realized. The price received upon
redemption may be more or less than the amount paid
by the Holder depending on the value of the Securities
in the Portfolio <PAGE>at the time of redemption. In
addition, because of the minimum face amounts in which
Securities are required to be sold, the proceeds of sale
may exceed the amount required at the time to redeem
Units; these excess proceeds will be distributed to
Holders (see Administration of the Trust--Trust
Supervision).
The right of redemption may be suspended and
payment postponed (1) for any period during which the
New York Stock Exchange, Inc. is closed other than for
customary weekend and holiday closings, (2) for any
period during which, as determined by the Securities and
Exchange Commission, (i) trading on that Exchange is
restricted or (ii) an emergency exists as a result of which
disposal or evaluation of the Securities is not reasonably
practicable or (3) for any other periods which the
Commission may by order permit (Section 5.02).
Computation of Redemption Price per 1,000 Units
Redemption Price per 1,000 Units is computed
by the Trustee, as of the Evaluation Time, on each June
30 and December 31 (or the last business day prior
thereto), on any business day as of the Evaluation Time
next following the tender of any Unit for redemption,
and on any other business day desired by the Trustee or
the Sponsor, by adding (a) the aggregate bid side
evaluation of the Securities, (b) cash on hand in the
Trust (other than cash covering contracts to purchase
Securities), (c) accrued and unpaid interest on the
Securities up to but not including the date of
redemption and (d) all other assets of the Trust;
deducting therefrom the sum of (x) taxes or other
governmental charges against the Trust not previously
deducted, (y) accrued fees and expenses of the Trustee
(including legal and auditing expenses), the Sponsor, the
Evaluator and counsel, and certain other expenses and
(z) cash held for distribution to Holders of record as of
a date prior to the evaluation; and dividing the result by
the number of Units outstanding as of the date of
computation (Section 5.01).
The current aggregate bid side evaluation of the
Securities is determined by the Evaluator in the
following manner: if the Securities are listed on a
national securities exchange ("high yield" bonds are
usually not so listed), this evaluation is generally based
on the closing sale prices on that exchange (unless the
Evaluator deems these prices inappropriate as a basis for
valuation). If the Securities are not so listed or, if so
listed and the principal market therefor is other than on
the exchange or there are no closing sale prices on the
exchange, the evaluation shall generally be based on the
closing sale prices on the over-the-counter market
(unless the Evaluator deems these prices inappropriate
as a basis for evaluation). If closing sale prices are
unavailable, the evaluation is generally determined (a)
on the basis of current bid side prices for the Securities,
(b) if bid side prices are not available for any Securities,
on the basis of current bid prices for comparable
securities, (c) by appraising the value of the Securities
on the bid side of the market or (d) by any combination
of the above. Among the factors which will be
considered in determining the value of any Restricted
Securities are (i) an estimate of the existence and extent
of any available market therefor, (ii) the extent of any
discount at which these Securities were acquired by the
Trust, (iii) the estimated period of time during which
these Securities will not be freely marketable, (iv) the
estimated expenses of qualifying these Securities for
public sale, (v) estimated underwriting commissions, if
any, and (vi) any credit or other factors affecting the
issuer or the guarantor of these Securities. In making
evaluations, opinions of counsel may be relied upon as
to whether any Securities are Restricted Securities.
EXPENSES AND CHARGES
<PAGE>Fees
The Trustee's, Sponsor's and Evaluator's fees are
set forth under Investment Summary. The Sponsor's
fee, which is earned for trust supervisory services, is
based on the face amount of Securities in the Trust at
the beginning of each annual period. The Sponsor's fee,
which is not to exceed the maximum amount set forth
under Investment Summary, may exceed the actual costs
of providing supervisory services for this Trust, but at no
time will the total amount it receives for trust
supervisory services rendered to all series of Smith
Barney Unit Trusts in any calendar year exceed the
aggregate cost to it of supplying these services in that
year (Section 7.04). The Sponsor may also be
reimbursed for bookkeeping and other administrative
services provided to the Trust in amounts not exceeding
its costs of providing these services. The Trustee's fees,
payable in monthly installments, are based on the face
amount of Securities in the Trust at the beginning of
each monthly period. Certain regular and recurring
expenses of the Trust, including the Evaluator's fee and
certain mailing and printing expenses, are borne by the
Trust (Section 3.14). The Trustee also receives benefits
to the extent that it holds funds on deposit in the
various non-interest bearing accounts created under the
Indenture. The foregoing fees may be adjusted for
inflation in accordance with the terms of the Indenture
without approval of Holders (Sections 4.02, 7.06 and
8.05).
Other Charges
These include: (a) fees of the Trustee for
extraordinary services (Section 8.05), (b) certain
expenses of the Trustee (including legal and auditing
expenses) and of counsel designated by the Sponsor
(Sections 3.04, 3.08, 8.01 and 8.05), (c) various
governmental charges (Sections 3.03 and 8.01 (h)), (d)
expenses and costs of action taken to protect the Trust
(Section 8.01 (d)), (e) indemnification of the Trustee for
any losses, liabilities and expenses incurred without gross
negligence, bad faith or wilful misconduct on its part
(Section 8.05), (f) indemnification of the Sponsor for any
losses, liabilities and expenses incurred without gross
negligence, bad faith, wilful misconduct or reckless
disregard of its duties (Section 7.03(b)) and (g)
expenditures incurred in contacting Holders upon
termination of the Trust (Section 9.02). The amounts of
these charges and fees are secured by a lien on the Trust
and, if the balances in the Income and Capital Accounts
(see below) are insufficient, the Trustee has the power
to sell Securities to pay these amounts (Section 8.05).
ADMINISTRATION OF THE TRUST
Records
The Trustee keeps a register of the names,
addresses and holdings of all Holders. The Trustee also
keeps records of the transactions of the Trust, including
a current list of the Securities and a copy of the
Indenture, which are available to Holders for inspection
at the office of the Trustee at reasonable times during
business hours (Sections 6.01, 8.02 and 8.04).
Accounts and Distributions
Interest received is credited to an Income
Account and other receipts to a Capital Account
(Sections 3.01 and 3.02). The Monthly Income
Distribution for each Holder as of each Record Day will
be made on the following Distribution Day or shortly
thereafter and shall consist of an amount
<PAGE>substantially equal to one-twelfth of the
Holder's pro rata share of the estimated annual income
to the Income Account, after deducting estimated
expenses, plus that Holder's pro rata share of the
distributable cash balance of the Capital Account
computed as of the close of business on the preceding
Record Day. Estimates of the amounts of the Monthly
Income Distributions are set forth under Investment
Summary. Proceeds received from the disposition,
payment or prepayment of any of the Securities
subsequent to a Record Day and prior to the succeeding
Distribution Day will be held in the Capital Account to
be distributed on the second succeeding Distribution
Day. The first distribution for persons who purchase
Units between a Record Day and a Distribution Day will
be made on the second Distribution Day following their
purchase of Units. No distribution need be made from
the Capital Account if the balance therein is less than
the amount set forth under Investment Summary
(Section 3.04). A Reserve Account may be created by
the Trustee by withdrawing from the Income or Capital
Accounts, from time to time, those amounts as it deems
requisite to establish a reserve for any taxes or other
governmental charges that may be payable out of the
Trust (Section 3.03). Funds held by the Trustee in the
various accounts created under the Indenture do not
bear interest (Section 8.01).
Trust Supervision
The Trust is a unit investment trust and is not a
managed fund. Traditional methods of investment
management for a managed fund typically involve
frequent changes in a portfolio of securities on the basis
of economic, financial and market analyses. The
Portfolio of the Trust, however, will not be managed and
therefore the adverse financial condition of an issuer will
not necessarily require the sale of its securities from the
Portfolio. However, the Sponsor may direct the
disposition of Securities upon default in payment of
amounts due on any of the Securities, institution of
certain legal proceedings, default in payment of amounts
due on other securities of the same issuer or guarantor,
or decline in price or the occurrence of other market or
credit factors that in the opinion of the Sponsor would
make the retention of these Securities detrimental to the
interest of the Holders (Section 3.06). If a default in the
payment of amounts due on any Security occurs and if
the Sponsor fails to give instructions to sell or hold that
Security, the Indenture provides that the Trustee, within
30 days of that failure by the Sponsor, shall sell the
Security (Section 3.10).
The Sponsor is required to instruct the Trustee
to reject any offer made by an issuer of any of the
Securities to issue new Securities in exchange or
substitution for any Securities pursuant to a refunding or
refinancing plan, except that the Sponsor may instruct
the Trustee to accept or reject any offer or to take any
other action with respect thereto as the Sponsor may
deem proper if (a) the issuer is in default with respect to
these Securities or (b) in the written opinion of the
Sponsor the issuer will probably default with respect to
these Securities in the reasonably foreseeable future.
Any Securities so received in exchange or substitution
will be held by the Trustee subject to the terms and
conditions of the Indenture to the same extent as
Securities originally deposited thereunder. Within five
days after the deposit of Securities in exchange or
substitution for underlying Securities, the Trustee is
required to give notice thereof to each Holder,
identifying the Securities eliminated and the Securities
substituted therefor (Section 3.07). Except as stated
herein, the acquisition by the Trust of any securities
other than the Securities initially deposited is prohibited.
Reports to Holders
The Trustee will furnish Holders with each
distribution a statement of the amounts of interest and
the amounts of other receipts, if any, which are being
distributed, expressed in each case as a <PAGE>dollar
amount per Unit. After the end of each calendar year,
the Trustee will furnish to each person who at any time
during the calendar year was a Holder of record, a
statement (i) summarizing transactions for that year in
the Income and Capital Accounts, (ii) identifying
Securities sold and purchased during the year and listing
Securities held and the number of Units outstanding at
the end of that calendar year, (iii) stating the
Redemption Price per Unit based upon the computation
thereof made at the end of that calendar year and (iv)
specifying the amounts distributed during that calendar
year from the Income and Capital Accounts (Section
3.06). The accounts of the Trust shall be audited at
least annually by independent certified public
accountants designated by the Sponsor and the report of
the accountants shall be furnished by the Trustee to
Holders upon request (Section 8.01 (e)).
In order to enable them to comply with Federal
and state tax reporting requirements, Holders will be
furnished upon request to the Trustee with evaluations
of Securities furnished to it by the Evaluator (Section
4.02).
Evidence of Ownership
Each purchaser is entitled to receive, on request,
without charge (except perhaps a small mailing charge)
a registered Certificate for his Units. These Certificates
are transferable or interchangeable upon presentation at
the office of the Trustee, with a payment of $2.00 if
required by the Trustee (or other amounts specified by
the Trustee and approved by the Sponsor) for each new
Certificate and any sums payable for taxes or other
governmental charges imposed upon the transaction
(Section 6.01) and compliance with the formalities
necessary to redeem Certificates (see Redemption).
Mutilated, destroyed, stolen or lost Certificates will be
replaced upon delivery of satisfactory indemnity and
payment of expenses incurred (Section 6.02).
Amendment and Termination
The Sponsor and Trustee may amend the
Indenture, without the consent of the Holders, (a) to
cure any ambiguity or to correct or supplement any
provision thereof which may be defective or inconsistent,
(b) to change any provision thereof as may be required
by the Securities and Exchange Commission or any
successor governmental agency or (c) to make any other
provisions which do not materially adversely affect the
interest of the Holders (as determined in good faith by
the Sponsor). The Indenture may also be amended in
any respect by the Sponsor and the Trustee, or any of
the provisions thereof may be waived, with the consent
of the Holders of 51% of the Units, provided that none
of these amendments or waivers will reduce the interest
in the Trust of any Holder without the consent of the
Holder or reduce the percentage of Holders of Units
required to consent to any of these amendments or
waivers without the consent of all Holders (Section
10.01).
The Indenture will terminate upon the earlier of
the disposition of the last Security held thereunder or
the mandatory termination date. The Indenture may be
terminated by the Sponsor if the value of the Trust is
less than the minimum value set forth under Investment
Summary, and may be terminated at any time by
Holders of 51% of the Units (Sections 8.01 (g) and
9.01). The Trustee will deliver written notice of any
termination to each Holder within a reasonable period
of time prior to the termination. Within a reasonable
period of time after the termination, the Trustee must
sell all of the Securities then held and distribute to each
Holder, after deductions for accrued but unpaid fees,
taxes and governmental and other charges, the Holder's
interest in the Income and Capital Accounts (Section
9.01). This distribution will normally be made by
mailing a check in the amount <PAGE>of each
Holder's interest in these accounts to the address of the
Holder appearing on the record books of the Trustee.
<PAGE>
<PAGE>
RESIGNATION, REMOVAL AND LIMITATIONS
ON LIABILITY
Trustee
The Trustee or any successor may resign upon
notice to the Sponsor. The Trustee may be removed
upon the direction of the Holders of 51% of the Units
at any time or by the Sponsor without the consent of any
of the Holders if the Trustee becomes incapable of
acting or becomes bankrupt or its affairs are taken over
by public authorities. The resignation or removal shall
become effective upon the acceptance of appointment by
the successor. In case of resignation or removal the
Sponsor is to use its best efforts to appoint a successor
promptly and if upon resignation of the Trustee no
successor has accepted appointment within thirty days
after notification, the Trustee may apply to a court of
competent jurisdiction for the appointment of a
successor (Section 8.06). The Trustee shall be under no
liability for any action taken in good faith in reliance on
prima facie properly executed documents or for the
disposition of moneys or Securities, nor shall it be liable
or responsible in any way for depreciation or loss
incurred by reason of the sale of any Security. This
provision, however, shall not protect the Trustee in cases
of wilful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties. In the
event of the failure of the Sponsor to act, the Trustee
may act under the Indenture and shall not be liable for
any of these actions taken in good faith. The Trustee
shall not be personally liable for any taxes or other
governmental charges imposed upon or in respect of the
Securities or upon the interest thereon. In addition, the
Indenture contains other customary provisions limiting
the liability of the Trustee (Sections 3.06, 3.09, 8.01 and
8.05).
Evaluator
The Evaluator may resign or may be removed,
effective upon the acceptance of appointment by its
successor, by the Sponsor, who is to use its best efforts
to appoint a successor promptly. If upon resignation of
the Evaluator no successor has accepted appointment
within thirty days after notification, the Evaluator may
apply to a court of competent jurisdiction for the
appointment of a successor (Section 4.04).
Determinations by the Evaluator under the Indenture
shall be made in good faith upon the basis of the best
information available to it; provided, however, that the
Evaluator shall be under no liability to the Trustee, the
Sponsor or the Holders for errors in judgment. This
provision, however, shall not protect the Evaluator in
cases of wilful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations and duties (Section
4.04). The Trustee, the Sponsor and the Holders may
rely on any evaluation furnished by the Evaluator and
shall have no responsibility for the accuracy thereof.
Sponsor
The Sponsor may resign at any time if a
successor Sponsor is appointed by the Trustee in
accordance with the Indenture. Any new Sponsor must
have a minimum net worth of $2,000,000 and must serve
at rates of compensation deemed by the Trustee to be
reasonable and as may not exceed amounts prescribed
by the Securities and Exchange Commission. If the
Sponsor fails to perform its duties or becomes incapable
of acting or becomes bankrupt or its affairs are taken
over by public authorities, then the Trustee may (1)
appoint a successor Sponsor at rates of compensation
deemed by the Trustee to be reasonable and as may not
exceed amounts prescribed by the Securities
<PAGE>and Exchange Commission, (2) terminate the
Indenture and liquidate the Trust or (3) continue to act
as Trustee without terminating the Indenture.
The Sponsor is under no liability to the Trust or
to the Holders for taking any action or for refraining
from taking any action in good faith or for errors in
judgment and will not be liable or responsible in any way
for depreciation of any Security or Units or loss incurred
in the sale of any Security or Units. This provision,
however, will not protect the Sponsor in cases of wilful
misfeasance, bad faith, gross negligence or reckless
disregard of its obligations and duties (Section 7.03).
The Sponsor may transfer all or substantially all of its
assets to a corporation or partnership which carries on
its business and duly assumes all of its obligations under
the Indenture and in that event it will be relieved of all
further liability under the Indenture.
MISCELLANEOUS
Trustee
The Trustee is United States Trust Company of
New York, with its principal place of business at 114
West 47th Street, New York, New York 10036. United
States Trust Company of New York has, since its
establishment in 1853, engaged primarily in the
management of trust and agency accounts for
individuals and corporations. The Trustee is a member
of the New York Clearing House Association and is
subject to supervision and examination by the
Superintendent of Banks of the State of New York, the
Federal Deposit Insurance Corporation and the Board
of Governors of the Federal Reserve System. In
connection with the storage and handling of certain
Bonds deposited in any of the State Trusts, the Trustee
may use the services of the Depository Trust Company.
These services may include safekeeping of the Bonds
and coupon-clipping, computer book-entry transfer and
institutional delivery services. The Depository Trust
Company is a limited purpose trust company organized
under the Banking Law of the State of New York, a
member of the Federal Reserve System and a clearing
agency registered under the Securities Exchange Act of
1934.
Legal Opinion
The legality of the Units has been passed upon
by Davis Polk & Wardwell, 450 Lexington Avenue, New
York, New York 10017, as counsel for the Sponsor.
Auditors
The financial statements included in this
Prospectus have been included in reliance upon the
report of Coopers & Lybrand, independent accountants,
given on the authority of that firm as experts in
accounting and auditing.
Sponsor
The Sponsor, Smith Barney Inc. ("Smith
Barney"), an investment banking and securities broker-
dealer firm, is a member of the New York Stock
Exchange, Inc., other major securities exchanges and
commodity exchanges, and the National Association of
Securities Dealers, Inc. Smith Barney is an indirect
wholly-owned subsidiary of The Travelers Inc. In July,
1993, Smith Barney, Harris Upham & Co. Incorporated
and Primerica Corporation (now The Travelers Inc.)
<PAGE>acquired the assets of the domestic retail
brokerage and asset management business of Shearson
Lehman Brothers Inc., previously the Sponsor of this
Trust. Smith Barney was incorporated in 1960 under
the laws of the State of Delaware and its history can be
traced through predecessor partnerships to 1873. Smith
Barney is engaged in the securities underwriting and
securities and commodities brokerage business with
over 100 branch offices throughout the world and more
than 6,000 employees. It acts as sponsor of numerous
unit investment trust funds and as a principal
underwriter of other investment companies. Smith
Barney acts as investment adviser to various individual
and institutional clients whose portfolios include
corporate, United States Government and municipal
securities. Affiliates of Smith Barney are investment
managers of other investment companies, including
money market funds, with assets in excess of $50 billion.
The principal executive offices of Smith Barney are
located at 1345 Avenue of the Americas, New York,
New York 10105.
DESCRIPTION OF RATINGS (as described by the
rating companies themselves)
Standard & Poor's Corporation
A--Debt rated A has a strong capacity to pay
interest and repay principal although it is somewhat
more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in
higher rated categories.
BBB--Debt rated BBB is regarded as having an
adequate capacity to pay interest and repay principal.
Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in
this category than in higher rated categories.
BB, B, CCC, CC--Debt rated BB, B, CCC and
CC is regarded, on balance, as predominantly speculative
with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation.
BB indicates the lowest degree of speculation and CC
the highest degree of speculation. Although such bonds
will likely have some quality and protective
characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse
conditions.
BB--Debt rated `BB' has less near-term
vulnerability to default than other speculative issues.
However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic
conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The `BB'
rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied `BBB -'
rating.
B--Debt rated `B' has a greater vulnerability to
default but currently has the capacity to meet interest
payments and principal repayments. Adverse business,
financial, or economic conditions will likely impair
capacity or willingness to pay interest and repay
principal. The `B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied `BB' or `BB -' rating.
CCC--Debt rated `CCC' has a currently
identifiable vulnerability to default, and is dependent
upon favorable business, financial, and economic
conditions to meet timely payment of interest and
repayment of principal. In the event of adverse business,
financial, or economic conditions, it is not
<PAGE>likely to have the capacity to pay interest and
repay principal. The `CCC' rating category is also used
for debt subordinated to senior debt that is assigned an
actual or implied `B' or `B -' rating.
CC--the rating `CC' is typically applied to debt
subordinated to senior debt that is assigned an actual or
implied `CCC' rating.
C--The rating `C' is typically applied to debt
subordinated to senior debt which is assigned an actual
or implied `CCC -' debt rating. The `C' rating may be
used to cover a situation where a bankruptcy petition
has been filed, but debt service payments are continued.
CI--The rating `CI' is reserved for income bonds
on which no interest is being paid.
D--Debt rated `D' is in payment default. The
`D' rating category is used when interest payments or
principal payments are not made on the date due even
if the applicable grace period has not expired, unless
S&P believes that such payments will be made during
such grace period. The `D' rating also will be used upon
the filing of a bankruptcy petition if debt service
payments are jeopardized.
NR--Indicates that no rating has been requested,
that there is insufficient information on which to base a
rating or that Standard & Poor's does not rate a
particular type of obligation as a matter of policy.
The ratings may be modified by the addition of
a plus or minus sign to show relative standing within the
major rating categories.
A provisional rating, indicated by "p" following
a rating, assumes the successful completion of the
project being financed by the issuance of the debt being
rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the
successful and timely completion of the project. This
rating, however, while addressing credit quality
subsequent to completion, makes no comment on the
likelihood of, or the risk of default upon failure of, such
completion.
Moody's Investors Service
A--Bonds which are rated A possess many
favorable investment attributes and are to be considered
as upper medium grade obligations. Factors giving
security to principal and interest are considered
adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered
as medium grade obligations, i.e., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics
as well.
Ba--Bonds which are rated Ba are judged to
have speculative elements; their future cannot be
considered as well-assured. Often the protection of
interest and principal may be very moderate
<PAGE>and thereby not well safeguarded during both
good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments or of maintenance of
other terms of the contract over any long period of time
may be small.
Caa--Bonds which are rated Caa are of poor
standing. Such issues may be in default or there may be
present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent
obligations which are speculative in a high degree. Such
issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated
class of bonds and issues so rated can be regarded as
having extremely poor prospects of ever attaining any
real investment standing.
NR--Should no rating be assigned, the reason
may be one of the following: (a) an application for
rating was not received or accepted; (b) the issue or
issuer belongs to a group of securities that are not rated
as a matter of policy; (c) there is a lack of essential data
pertaining to the issue or issuer; or (d) the issue was
privately placed, in which case the rating is not published
in Moody's publications.
Moody's applies numerical modifiers 1, 2, and 3
in generic rating classifications in its corporate bond
rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates that the issue ranks in the lower end
of its generic rating category.
Conditional ratings, indicated by "Con", are given
to bonds for which the security depends upon the
completion of some act or the fulfillment of some
condition. These are bonds secured by (a) earnings of
projects under construction, (b) earnings of projects
unseasoned in operating experience, (c) rentals which
begin when facilities are completed, or (d) payments to
which some other limiting condition attaches. A
parenthetical rating denotes probable credit stature upon
completion of construction or elimination of basis of
condition.
<PAGE>
<TABLE>
HIGH YIELD MUNICIPAL SERIES 6
A UNIT INVESTMENT TRUST
PROSPECTUS
This Prospectus does not contain all of the information set
forth in the 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.
Index
<S> <C>
Investment Summary 2
Independent Auditors Report 3
Report of Independent Accountants 4
Financial Statements 5
Portfolio 12
Trust Structure 13
Risk Factors 14
Description of the Trust 25
Taxes 28
Public Sale of Units 31
Market for Units 33
Redemption 34
Expenses and Charges 35
Administration of the Trust 36
Resignation, Removal and Limitations on
Liability 39
Miscellaneous 40
Description of Ratings 41
<S> <C> <C>
<C>
Sponsors: Evaluator: Trustee:
Independent Auditors:
Smith Barney Inc. Kenny S&P Evaluation United
States Trust KPMG Peat Marwick LLP
Unit Trust Department Services Company
of New York 345 Park Avenue
Two World Trade Center 65 Broadway 114 West
47th Street New York, NY 10154
101st Floor New York, New York 10006 New York,
NY 10036 (212) 758-9700
New York, New York 10048 (212) 208-8580 1(800)
257-2356
1(800) 298-UNIT
No person is authorized to give any information or to make any
representations with respect to this investment company not contained in this
Prospectus, and any information or representations not contained herein
must not be relied upon as having been authorized. This Prospectus does 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.
</TABLE>
<PAGE>
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to the Registration Statement
on Form S-6 comprises the following papers and documents:
The facing Sheet on Form S-6.
The cross-reference sheet(incorporated by reference to
the Cross-Reference Sheet to the Registration Statement
of High Yield Municipal Series 1, 1933
Act File No.33-15191).
The Prospectus.
The Signatures.
The following exhibits:
Consent of the Evaluator
Consent of KPMG Peat Marwick
Consent of Coopers & Lybrand
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the registrant, High Yield Municipal Series 6 (a Unit Investment
Trust) certifies that it meets all the requirements for effectiveness
of this Post-Effective Amendment pursuant to Rule 485(b) under
the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of New York, and State of
New York on the 31st day of October, 1994.
Signatures appear on pages II-3
A majority of the members of the Board of Directors of
Smith Barney Inc. have signed this Post-Effective Amendment
pursuant to Powers of Attorney authorizing the person signing
this Post-Effective Amendment to do so on behalf of such
members.
<PAGE>
TAX EXEMPT SECURITIES TRUST
BY SMITH BARNEY INC.
By
_________________________________________
(George S. Michinard, Jr.)
By the following persons*, who constitute a majority of the
directors of Smith Barney Inc.:
Steven D. Black
James S. Boshart III
Robert A. Case
James Dimon
Robert Druskin
Robert F. Greenhill
Jeffrey B. Lane
Robert H. Lessin
John F. Lyness
Jack L. Rivkin
By
_________________________________________
(George S. Michinard, Jr.
Attorney-in-Fact)
* Pursuant to Powers of Attorney previously filed.
II-3
<PAGE>
KENNY S&P EVALUATION SERVICES
A Division of Kenny Information Systems, Inc.
65 Broadway
New York, New York, 10006-2511
Telephone 212/770-4000
Smith Barney Inc.
1345 Avenue of the Americas
New York, NY 10105
RE:High Yield Muni
Series 6
Gentlemen:
We have examined the post-effective Amendment to
the
Registration Statement File No. 33-21620 for the
above-captioned
trust. We hereby acknowledge that Kenny S&P Evaluation
Services,
a division of Kenny Information Systems, Inc. is currently
acting
as the evaluator for the trust. We hereby consent to the use
in
the Amendment of the reference to Kenny S&P Evaluation
Services,
a division of Kenny Information Systems, Inc. as evaluator.
In addition, we hereby confirm that the ratings
indicated in the above-referenced Amendment to the
Registration
Statement for the respective bonds comprising the trust
portfolio
are the ratings currently indicated in our KENNYBASE
database.
You are hereby authorized to file a copy of this
letter
with the Securities and Exchange Commission.
Sincerely,
John R. Fitzgerald
Vice President
Chief Financial Officer
<PAGE>
CONSENT OF Independent AUDITORS
We consent to the use of our report dated October
28, 1994, on the statement of assets and liabilities of Smith
Barney Shearson Unit Trusts, High Yield Municipal Series
6, including the schedule of portfolio investments, as of
June 30, 1994, and the related statements of operations and
changes in net assets for the year then ended, and the
selected supplemental per-unit data for the year then ended,
included herein and to the reference to our firm under the
heading "AUDITORS" in the prospectus.
KPMG Peat Marwick LLP
New York, New York
October 31, 1994
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT
ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment
No. 6
to the Registration Statement on Form S-6 (File No.
33-22620)
of our report dated August 20, 1993, on our audit of the
statements of operations and changes in net assets and
selected supplemental per-unit data of Smith Barney
Shearson Unit Trusts,High Yield Municipal Series 6
(formerly Shearson Lehman Brothers Unit Trusts,
High Yield Municipal Series 6). We also consent to
the reference to our firm under the caption
"Miscellaneous-Auditors."
COOPERS & LYBRAND
L.L.P.
/s/COOPERS & LYBRAND
L.L.P.
Boston, Massachusetts
December 19, 1994
