Pricing Supplement No. 738 Dated 4/13/94 Rule 424(b)(3)
(To Prospectus dated December 14, 1993 and File No. 33-51269,
Prospectus Supplement dated December 14, 1993) 33-57922 and 33-49136
SALOMON INC
Medium-Term Notes, Series D
(Registered Notes -- Floating Rate or Indexed Rate)
Due More Than Nine Months from Date of Issue
Principal Amount or Face Amount: $5,000,000.00
Issue Price: 100.0000000000%
Proceeds to Company on original issuance: $5,000,000.00
Commission or Discount on original issuance: $.00
Salomon Brothers Inc's capacity on original issuance: |X| As agent
| | As principal
If as principal:
| | The Registered Notes are being offered at varying prices related
to prevailing market prices at the time of resale.
| | The Registered Notes are being offered at a fixed initial public
offering price of % of Principal Amount or Face Amount.
Original Issue Date: 4/21/94
Stated Maturity: 4/21/95
Specified Currency:
(If other than U.S. Dollars)
Authorized Denominations: $100,000 and integral multiples of $1,000
thereafter.
(If other than as set forth in the Prospectus Supplement)
Interest Payment Dates: 21st of July and Oct. 1994 and Jan. and
April 1995.
(If other than as set forth in the Prospectus Supplement)
Indexed Principal Note: |X| Yes (see attached) | | No
Floating Rate: |X| Indexed Rate: | | (see attached)
Initial Interest Rate: 5.7500000%
Base Rate: | | CD Rate | | Commercial Paper Rate | | Federal Funds Rate
|X| LIBOR Telerate | | LIBOR Reuters | | Treasury Rate
| | Treasury Rate Constant Maturity | | Other (see attached)
Interest Reset Period or Interest Reset Dates:
Quarterly on the 21st of April, July and Oct. 1994,
and Jan. 1995.
Index Maturity: One year
Spread (+/-): +150 b.p.
Spread Multiplier: 0
Spread Reset: |X| The Spread or Spread Multiplier may not be changed prior
to Stated Maturity.
| | The Spread or Spread Multiplier may be changed prior to
Stated Maturity (see attached).
Optional Reset Dates (if applicable):
Maximum Interest Rate:
Minimum Interest Rate:
Amortizing Note: | | Yes |X| No
Amortization Schedule:
Optional Redemption: | | Yes |X| No
Optional Redemption Dates:
Redemption Prices:
Optional Repayment: | | Yes |X| No
Optional Repayment Dates:
Optional Repayment Prices:
Optional Extension of Stated Maturity: | | Yes |X| No
Final Maturity:
Discount Note: | | Yes |X| No
Total Amount of OID:
Yield to Maturity:
Pricing Supplement dated April 20, 1994
(to Prospectus Supplement dated December 14, 1993
to Prospectus dated December 14, 1993)
RISK FACTORS
THE PRINCIPAL AMOUNT PAYABLE ON THIS NOTE IS INVERSELY
LINKED TO THE "2023 TREASURY YIELD". THE INDEXED PRINCIPAL
AMOUNT PAYABLE WILL DECLINE IN PROPORTION TO THE NUMBER OF DAYS
IN THE "ACCRUAL PERIOD" THAT "2023 TREASURY YIELD" IS ABOVE THE
"STRIKE YIELD". UNDER CERTAIN CIRCUMSTANCES, THE INDEXED
PRINCIPAL AMOUNT PAYABLE ON THIS NOTE WILL BE LESS THAN ITS FACE
AMOUNT AND CAN DECLINE TO $0. PURCHASERS OF THIS NOTE SHOULD BE
PREPARED TO SUSTAIN A TOTAL LOSS OF PRINCIPAL.
DESCRIPTION OF NOTE
General
The description in this Pricing Supplement of the
particular terms of the Registered Note offered hereby (the
"Note") supplements, and to the extent inconsistent therewith
replaces, the descriptions of the general terms and provisions of
the Registered Notes set forth in the accompanying Prospectus and
Prospectus Supplement, to which descriptions reference is hereby
made.
A "New York Banking Day" means a day in which
commercial banks in the City of New York are open for business
(including dealings in foreign exchange and foreign currency
deposits). A "London Banking Day" means a day in which
commercial banks in London, England are open for business
(including dealings in foreign exchange and foreign currency
deposits).
3 month USD LIBOR BBA and 2023 Treasury Yield (each as
defined below) will be determined by the Calculation Agent. The
Calculation Agent will be Salomon Brothers Inc, which is a
wholly-owned subsidiary of the Company.
Indexed Principal
The Principal Amount payable at Stated Maturity of the
Note (the "Indexed Principal Amount") is to be determined in
accordance with the formula set out below:
IPA = FA x [1.15 x N/182], where
"IPA" means the Indexed Principal Amount payable at
Stated Maturity of the Note.
"FA" means the Face Amount of the Note.
"N" means the number of days the 2023 Treasury Yield
is at or below 7.98% (the "Strike Yield") during the period from
and including October 14, 1994 to but excluding April 14, 1995
(the "Accrual Period"). There are 182 days in the Accrual
Period, and "N" may be any number from 0 to and including 182.
"2023 Treasury Yield" means, as of 6:00 p.m. New York
time on any day (or, in the case of a day that is not a New York
Banking Day, the immediately preceding New York Banking Day), the
yield of the United States Treasury Bond maturing on August 15,
2023 and paying interest at a rate of 6.25% on its principal
amount, as reported on the Telerate Page 501 (or any successor
page thereto). However, if the rate described in the preceding
sentence does not appear with respect to any New York Banking Day
during the Accrual Period, the Calculation Agent will contact the
Federal Reserve and 2023 Treasury Yield shall mean the rate for
the United States Treasury Bond maturing on August 15, 2023 and
paying interest at a rate of 6.25% on the principal amount on
such day calculated by the Calculation Agent based on information
provided by the Federal Reserve with respect to such New York
Banking Day. In the event the Federal Reserve does not provide
sufficient information for the Calculation Agent to perform such
calculation, then 2023 Treasury Yield shall mean the arithmetic
mean of the closing bid yield quotations for United States
Treasury Bonds maturing on August 15, 2023 and paying interest at
a rate of 6.25% on the principal amount on such day as reported
by three leading dealers of United States government securities,
chosen by the Calculation Agent, according to the written records
of such dealers, one of which dealers may be Salomon Brothers
Inc, a wholly-owned subsidiary of the Company. If the
Calculation Agent cannot obtain three such quotations, 2023
Treasury Yield shall mean the arithmetic mean of any two such
quotations obtained by the Calculation Agent, or, if the
Calculation Agent can obtain only one such quotation, such
quotation.
The Indexed Principal Amount payable at Stated Maturity
of the Note may be less than the Face Amount of the Note. The
Indexed Principal Amount payable at Stated Maturity to the holder
of the Note will vary inversely with 2023 Treasury Yield. In
particular, if 2023 Treasury Yield is above the Strike Yield for
more than 24 days during the Accrual Period, the Indexed
Principal Amount payable at Stated Maturity in respect of the
Note will be less than its Face Amount. If 2023 Treasury Yield
is above the Strike Yield throughout the entire Accrual Period, a
Holder of the Note would lose the entire Face Amount. PURCHASERS
OF THE NOTE SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF
PRINCIPAL.
The table below sets forth the Indexed Principal Amount
as a percentage of the Face Amount that will be payable for
certain hypothetical combinations of numbers of days on which
2023 Treasury Yield is (i) at or below and (ii) above the Strike
Yield during the Accrual Period. There are 182 days in the
Accrual Period and thus the number of days on which the 2023
Treasury Yield is (i) at or below or (ii) above the Strike Yield
will always sum to 182. The hypothetical combinations set forth
below are for illustrative purposes only.
Days 2023 Days 2023
Treasury Yield Treasury Yield
is at or below is above
the Strike Yield the Strike Yield IPA as % of FA
0 182 0.0%
15 167 9.48%
30 152 18.96%
45 137 28.43%
60 122 37.91%
75 107 47.39%
90 92 56.87%
105 77 66.35%
120 62 75.82%
135 47 85.30%
150 32 94.78%
165 17 104.26%
180 2 113.74%
182 0 115.00%
As the table above shows, the Indexed Principal Amount payable in
respect of the Note at Stated Maturity may decline to $0.
HOLDERS OF THE NOTE SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF
PRINCIPAL.
Interest
The Note will pay interest on the 21st day of each of
July and October 1994 and January and April 1995 (each an
"Interest Payment Date"). If an Interest Payment Date would
otherwise be a day that is not a New York and London Banking Day,
such Interest Payment Date shall not be postponed; provided,
however, that any payment required to be made in respect of such
Note on a date (including the day of Stated Maturity) that is not
a New York and London Banking Day need not be made on such date,
but may be made on the next succeeding day that is a New York and
London Banking Day with the same force and effect as if made on
such date, and no additional interest shall accrue as a result of
such delayed payment.
The period from the Issue Date of the Note to but
excluding the first Interest Payment Date is the Initial Interest
Period. The period from and including the first Interest Payment
Date (and each Interest Payment Date thereafter) to but excluding
the next Interest Payment Date is referred to as an Interest
Reset Period.
For the Initial Interest Period, the Note will bear
interest at a rate equal to 5.75% (the "Initial Interest Rate").
For each Interest Reset Period thereafter, the Note will bear
interest at a rate equal to the sum of (i) the Base Rate, which
shall be 3 month USD LIBOR BBA (as defined below) on the day that
is two London Banking Days prior to the first day of the relevant
Interest Reset Period (the "Interest Reset Date"), plus (ii) the
Spread, which shall be 150 basis points.
"3 month USD LIBOR BBA" means, as of 11:00 a.m. London
time on any day, the rate for deposits in dollars for a period of
three months which appears on the Telerate Page 3750 (or any
successor page thereto). However, if the rate described in the
preceding sentence does not appear on any day, 3 month USD LIBOR
BBA shall the rate determined on the basis of the rates at which
deposits in dollars are offered by the "Reference Banks" (as
defined below) at approximately 11:00 a.m., London Time on the
relevant day to prime banks in the London market for a period of
3 months commencing on the second following New York and London
Banking Day and in a "Representative Amount" (as defined below).
The Calculation Agent will request the principal office of each
of the Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, 3 month USD LIBOR BBA
will be the arithmetic mean of the quotations. If fewer than two
quotations are provided as requested, 3 month USD LIBOR BBA will
be the arithmetic mean of the rates quoted by major banks in New
York City, selected by the Calculation Agent, at approximately
11:00 a.m. New York City time on any day for loans in dollars to
leading European banks for a period of three months commencing on
such day and in a Representative Amount. If fewer than two
quotations are provided as requested on the second New York and
London Banking Day prior to the Interest Reset Date for the final
Interest Reset Period or the immediately preceding Interest Reset
Period, 3 month USD LIBOR BBA with respect to such Interest Reset
Date will be the arithmetic mean of the rates quoted by major
banks in New York City, selected by the Calculation Agent, at
approximately 11:00 a.m. New York City time on such Interest
Reset Date for loans in dollars to leading European banks for a
period of three months commencing on such Interest Reset Date and
in a Representative Amount.
"Representative Amount" means an amount that is
representative of a single transaction in the relevant market at
the specified time.
"Reference Banks" means four major banks in the London,
England interbank market.
TAXATION
The following summary supplements, and to the extent inconsistent
therewith replaces, the discussion of United States taxation set
forth in the accompanying Prospectus Supplement under the heading
"United States Tax Considerations," to which discussion reference
is hereby made.
The following is a summary of certain anticipated U.S.
Federal income tax consequences to a Holder of an investment in
the Note. It does not purport to address every U.S. Federal
income tax issue raised by ownership of the Note. In particular,
this summary applies only to a person that holds the Note as a
capital asset and does not deal with a person in a special tax
situation, a person that holds the Note as part of an integrated
investment (including a "straddle") comprised of the Note and one
or more other positions or a person that purchases the Note after
its initial issuance in a secondary market transaction.
While there are no regulations, published rulings or
judicial decisions addressing the characterization for U.S.
Federal income tax purposes of securities with terms
substantially the same as the Note, the Note should be treated
for such purposes as a debt instrument issued by the Company.
The remainder of this summary assumes that the Note will
constitute indebtedness of the Company for U.S. Federal income
tax purposes.
The Note should be treated as providing for "contingent
payments", within the meaning of certain proposed regulations
released in 1986 (the "1986 Proposed Regulations"). The 1986
Proposed Regulations have not yet been adopted and have been the
subject of extensive comment. In January 1993, the Internal
Revenue Service submitted proposed regulations to the Federal
Register ("the 1993 Proposed Regulations") that would have
replaced the 1986 Proposed Regulations. The 1993 Proposed
Regulations, which were proposed to be effective for contingent
payment debt instruments issued on or after the date 60 days
after the date the regulations were finalized, would have
substantially revised the treatment of such debt instruments.
The 1993 Proposed Regulations were withdrawn from the Federal
Register prior to publication, however, pursuant to an order of
the Director of the Office of Management and Budget, and the
Department of the Treasury has announced that it expects to issue
new contingent payment debt regulations in proposed form during
1994. Accordingly, it is impossible to predict whether, or in
what manner, the 1986 Proposed Regulations may be modified and
whether any modifications would apply to the Note.
Because the Note is a short-term debt instrument, the
Note will be treated as issued with original issue discount.
While the application of the 1986 Proposed Regulations to a
short-term contingent payment debt instrument is unclear, the
Company intends to treat original issue discount on the Note as
accruing based on the coupon rate during each accrual period, and
will report original issue discount on the Note to the Internal
Revenue Service on that basis.
Under this approach, a Holder would include in income
for any taxable year the sum of the interest accrued for each day
during such taxable year. The payment received by a Holder at
the maturity of the Note would be treated as a non-taxable return
of capital to the extent it equals or is less than the issue
price of the Note, and would be treated as interest to the extent
it exceeds the issue price. Any loss realized on the retirement
of the Note, and any gain or loss realized on the sale, exchange,
or other disposition of the Note would be capital gain or loss,
and generally would constitute long-term capital gain or loss if
the Holder has held the Note for more than one year at the time
of disposition. It is possible that the Internal Revenue Service
will contend that a Holder of the Note should adopt a method
other than the approach described above for determining the
income required to be included by the Holder.
Prospective purchasers of the Note are urged to consult
their own tax advisors regarding the U.S. Federal (as well as
state and local) tax consequences to them of the possible tax
characterizations of the Note (including the possible effect of
the 1986 and 1993 Proposed Regulations) in light of their
particular circumstances.
