<PAGE> 1
Filed pursuant to Rule 424(b)(2)
Registration Nos. 333-38931 and 333-01807
P R O S P E C T U S S U P P L E M E N T
(To Prospectus Dated December 1, 1997)
$39,000,000
SALOMON SMITH BARNEY HOLDINGS INC.
EQUITY LINKED NOTES
BASED UPON THE
DOW JONES INDUSTRIAL AVERAGE(SM)
DUE SEPTEMBER 6, 2005
($15 PRINCIPAL AMOUNT PER NOTE)
------------------
<TABLE>
<S> <C>
GENERAL: PAYMENT AT MATURITY:
- - Senior unsecured debt securities. - Principal Amount ($15 per Note) +
- - Issuable and transferable only in minimum Supplemental Redemption Amount.
denominations of $15 or integral multiples - The Supplemental Redemption Amount will be
thereof. based on the percentage increase, if any, in
the Dow Jones Industrial Average(SM)
- - No payments prior to maturity. (calculated based on an average value of the
index during the eighteen months prior to
- - Not redeemable prior to maturity. maturity) multiplied by a Participation Rate
of 102.5%. The Supplemental Redemption
- - The Notes have been approved for listing on Amount may be ZERO, but will not be less
the Chicago Board Options Exchange under the than zero.
symbol "DSB," subject to official notice of
issuance.
</TABLE>
For information as to the Supplemental Redemption Amount and certain United
States federal income tax consequences to holders of the Notes see "Description
of Notes -- Determination of the Supplemental Redemption Amount" and "Certain
United States Federal Income Tax Considerations" in this Prospectus Supplement.
"Dow Jones(SM)" and "Dow Jones Industrial Average(SM)" are service marks of
Dow Jones & Company, Inc. ("Dow Jones") and have been licensed for use for
certain purposes by the Company. The Notes are not sponsored, endorsed, sold or
promoted by Dow Jones. Dow Jones makes no representation regarding the
advisability of investing in the Notes.
INVESTING IN THE NOTES INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS RELATING TO THE NOTES" BEGINNING ON PAGE S-6.
------------------
THESE NOTES HAVE NOT BEEN APPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED
THAT THIS PROSPECTUS SUPPLEMENT, OR ANY ACCOMPANYING PROSPECTUS, IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
====================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNTS THE COMPANY(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................... $15 $0.375 $14.625
- ----------------------------------------------------------------------------------------------------
Total(2)................................... $39,000,000 $975,000 $38,025,000
====================================================================================================
</TABLE>
(1) Before deducting expenses payable by the Company estimated at $75,000.
(2) The Company has granted to the Underwriters an option, exercisable within
30 days of the date of this Prospectus Supplement, to purchase up to an
aggregate of $5,850,000 principal amount of Notes at the price to public
less the underwriting discounts, for the purpose of covering
over-allotments, if any. If the Underwriters exercise such option in
full, the total price to public, underwriting discounts and proceeds to
the Company will be $44,850,000, $1,121,250 and $43,728,750,
respectively. See "Underwriting" in this Prospectus Supplement.
------------------
The Notes are offered by the several Underwriters named herein, subject to
prior sale, when, as and if accepted by them and subject to certain conditions.
It is expected that delivery of the Notes will be made at the offices of Smith
Barney Inc., 388 Greenwich Street, New York, New York, or through the facilities
of The Depository Trust Company, on or about March 4, 1998.
------------------
SALOMON SMITH BARNEY CIBC OPPENHEIMER
FEBRUARY 26, 1998
<PAGE> 2
SUMMARY INFORMATION -- Q&A
This summary includes questions and answers that highlight selected
information from the Prospectus and Prospectus Supplement to help you understand
the Equity Linked Notes based upon the Dow Jones Industrial Average(SM) (the
"Notes"). You should carefully read the entire Prospectus and Prospectus
Supplement to fully understand the terms of the Notes, certain information
regarding how the Dow Jones Industrial Average(SM) (the "Dow Jones Index" or the
"Index") is calculated and maintained, as well as the principal tax and other
considerations that are important to you in making a decision about whether to
invest in the Notes. You should, in particular, carefully review the section
entitled "Risk Factors Relating To The Notes," which highlights certain risks,
to determine whether an investment in the Notes is appropriate for you. All of
the information set forth below is qualified in its entirety by the more
detailed explanation set forth elsewhere in this Prospectus Supplement and the
accompanying Prospectus.
WHAT ARE THE NOTES?
The Notes are a series of senior debt securities issued by Salomon Smith
Barney Holdings Inc. (the "Company"). The Notes are not secured by collateral.
The Notes will rank equally with all other unsecured and unsubordinated debt of
the Company. The Notes mature on September 6, 2005 and do not provide for
earlier redemption. The Company will make no periodic payments of interest on
the Notes. The Company will make no other payments on the Notes until maturity.
Each Note represents a principal amount of $15. You may transfer the Notes
only in denominations of $15 and integral multiples thereof. You will not have
the right to receive physical certificates evidencing your ownership except
under limited circumstances. Instead, the Company will issue the Notes in the
form of a global certificate, which will be held by The Depository Trust Company
(the "Depositary") or its nominee. Direct and indirect participants in The
Depositary will record beneficial ownership of the Notes by individual
investors. You should refer to the section "Description of the
Notes -- Book-Entry System" in this Prospectus Supplement.
WHAT WILL I RECEIVE AT MATURITY OF THE NOTES?
We have designed the Notes for investors who want to protect their
investment by receiving at least the principal amount of their investment at
maturity and who also want to participate in a possible increase in the Dow
Jones Index. At maturity, you will receive a payment on each Note equal to the
sum of two amounts: the principal amount ($15 per Note) and the "Supplemental
Redemption Amount," which is based on the percentage increase, if any, in the
Dow Jones Index. You will not receive less than the principal amount.
PRINCIPAL AMOUNT
The principal amount per Note is $15.
SUPPLEMENTAL REDEMPTION AMOUNT
The Supplemental Redemption Amount per Note will equal:
EIV - SIV
$15 X ----------------- X PR
SIV
but will not be less than zero.
EIV = Ending Index Value
SIV = Starting Index Value
PR = Participation Rate
"Ending Index Value" means the average of the values of the Dow Jones Index
at the close of the market on the 1st of each month during the eighteen-month
period prior to maturity of the Notes, commencing in April 2004. If the 1st of
any such month is not a Business Day, the Index value for that month will equal
the
S-2
<PAGE> 3
closing value of the Index on the next Business Day, except that if September 1,
2005 is not a Business Day, the Index value for September 2005 will equal the
closing value of the Index on the immediately preceding Business Day. If there
is a disruption in the trading of the securities comprising the Dow Jones Index
or certain instruments linked to the Dow Jones Index during a scheduled
calculation date in any such month, the Index value for that month for purposes
of calculating the Ending Index Value will equal the closing value of the Index
on the next Business Day on which there is not a market disruption, except that,
in the case of such a disruption on September 1, 2005, the Index value for
September 2005 will equal the closing value of the Index on the immediately
preceding Business Day on which there is not a market disruption. You should
refer to the section "Description of the Notes -- Market Disruption Events" in
this Prospectus Supplement.
"Starting Index Value" equals 8490.67, which was the value of the Index at
the market close on the date the Notes were priced for initial sale to the
public.
"Participation Rate" equals 102.5%.
For more specific information about the Supplemental Redemption Amount,
please see "Description of the Notes -- Determination of the Supplemental
Redemption Amount" in this Prospectus Supplement.
The Company will pay you a Supplemental Redemption Amount only if the
Ending Index Value is greater than the Starting Index Value. IF THE ENDING INDEX
VALUE IS LESS THAN, OR EQUAL TO, THE STARTING INDEX VALUE, THE SUPPLEMENTAL
REDEMPTION AMOUNT WILL BE ZERO. The Company will pay you the principal amount of
the Notes regardless of whether any Supplemental Redemption Amount is payable.
WHAT IS THE EFFECT OF CALCULATING THE ENDING INDEX VALUE ON THE BASIS OF AN
AVERAGE?
The use of an eighteen-month average, rather than one closing Index value
or the value of the Index at maturity, to calculate the Ending Index Value will
reduce the impact of variations in the Index during the eighteen months
preceding maturity of the Notes. As a result, the market value of the Notes and
the Supplemental Redemption Amount will be less sensitive to fluctuations in the
value of the Index shortly prior to maturity.
SUPPLEMENTAL REDEMPTION AMOUNT -- EXAMPLES
Here are two examples of Supplemental Redemption Amount calculations:
Example 1: Dow Jones Index decreases below the Starting Index Value
Starting Index Value: 8490.67
Hypothetical Ending Index Value: 8,000
Participation Rate: 102.5%
Supplemental Redemption 8,000 - 8490.67
----------------------- = $15 X ----------------- x 102.5% = $0
Amount (per Note) 8490.67
(cannot be less than zero)
Total payment at maturity (per Note) = $15 + $0 = $15
Example 2: Dow Jones Index increases above the Starting Index Value
Starting Index Value: 8490.67
Hypothetical Ending Index Value: 10,000
Participation Rate: 102.5%
<TABLE>
<CAPTION>
<S> <C> <C> <C>
10,000 - 8490.67
Supplemental Redemption Amount (per Note) = $15 X ------------------- X 102.5% = $2.73
8490.67
</TABLE>
Total payment at maturity (per Note) = $15 + $2.73 = $17.73
S-3
<PAGE> 4
WHO PUBLISHES THE INDEX AND WHAT DOES IT MEASURE?
The Dow Jones Industrial Average(SM) is published by Dow Jones & Company,
Inc. ("Dow Jones"). The Dow Jones Index is a price-weighted index, which means a
component stock's weight in the Index is based on its price per share rather
than the total market capitalization of the issuer. The Index is designed to
provide an indication of the composite price performance of 30 common stocks of
corporations representing a broad cross-section of U.S. industry. The component
stocks of the Index are selected by the editors of The Wall Street Journal (the
"WSJ"). The corporations represented in the Index tend to be market leaders in
their respective industries and their stocks are typically widely held by
individuals and institutional investors. Changes in the composition of the Index
are made entirely by the editors of the WSJ without consultation with the
corporations represented in the Index, any stock exchange, any official agency
or the Company. Although changes to the common stocks included in the Index tend
to be made infrequently, the component stocks of the Index may be changed at any
time for any reason. The corporations currently represented in the Index are
incorporated in the U.S. and its territories and their stocks are traded on the
New York Stock Exchange, Inc. (the "NYSE"). As of February 26, 1998, the market
capitalization of the stocks in the Index ranged from approximately $6.0 billion
to $253.0 billion, with the average market capitalization being $68,420,272,000.
The value of the Dow Jones Index is the sum of the primary exchange prices
of each of the 30 common stocks included in the Index, divided by a divisor that
is designed to provide a meaningful continuity in the value of the Index.
Because the Index is price-weighted, stock splits or changes in the component
stocks could result in distortions in the Index value. In order to prevent such
distortions related to extrinsic factors, the divisor may be changed in
accordance with a mathematical formula that reflects adjusted proportions within
the Index. The current divisor of the Index is published daily in the WSJ and
other publications. In addition, other statistics based on the Index may be
found in a variety of publicly available sources.
HOW HAS THE DOW JONES INDEX PERFORMED HISTORICALLY?
We have provided a table showing the closing value of the Dow Jones Index
on the last business day of each year from 1945 to 1997 and the closing values
of the Index on the last Business Day of each month from January 1992 to
December 1997, as published by Dow Jones in the WSJ. You can find these tables
in the section "The Dow Jones Index -- Historical Data on the Dow Jones Index"
in this Prospectus Supplement. We have provided this historical information to
help you evaluate the behavior of the Dow Jones Index in various economic
environments; however, past performance is not necessarily indicative of how the
Index will perform in the future. You should refer to the section "Risk
Factors -- Relationship of the Notes and the Dow Jones Index."
WHAT ABOUT TAXES?
If you are a U.S. individual or taxable entity, you generally will be
required to pay taxes on ordinary income from the Notes over their term based
upon an estimated yield for the Notes, even though you will not receive any
payments from us until maturity. We have determined this estimated yield, in
accordance with regulations issued by the Treasury Department, solely in order
for you to figure out the amount of taxes that you will owe each year as a
result of owning a Note. This estimate is neither a prediction nor a guarantee
of what the actual Supplemental Redemption Amount will be, or that the actual
Supplemental Redemption Amount will even exceed zero. We have determined that
this estimated yield will equal 6.28% per annum (compounded semiannually).
Based upon this estimated yield, if you pay your taxes on a calendar year
basis and if you buy a Note at original issue for $15 and hold the Note until
maturity, you will be required to pay taxes on the following amounts of ordinary
income from the Note each year: $0.7794 in 1998, $0.9909 in 1999, $1.0561 in
2000, $1.1195 in 2001, $1.1898 in 2002, $1.2645 in 2003, $1.3476 in 2004, and
$0.9667 in 2005. However, in 2005, the amount of ordinary income that you will
be required to pay taxes on from owning a Note may be greater or less than
$8.7145, depending upon the amount you receive at maturity. Also, if the sum of
the principal amount and the Supplemental Redemption Amount is less than
$23.7145, you may have an ordinary (rather
S-4
<PAGE> 5
than capital) loss which you could deduct against other income you may have in
2005. For further information, see "Certain United States Federal Income Tax
Considerations" in this Prospectus Supplement.
WILL THE NOTES BE LISTED ON A STOCK EXCHANGE?
The Notes have been approved for listing on the Chicago Board Options
Exchange (the "CBOE") under the symbol "DSB," subject to official notice of
issuance. You should be aware that the listing of the Notes on the CBOE will not
necessarily ensure that a liquid trading market will be available for the Notes.
You should review the section "Risk Factors -- Possible Illiquidity of the
Secondary Market" in this Prospectus Supplement.
WHAT IS THE ROLE OF OUR SUBSIDIARY, SMITH BARNEY INC.?
Our subsidiary, Smith Barney Inc. ("Smith Barney"), is one of the
underwriters for the offering and sale of the Notes. After the initial offering,
Smith Barney and/or other subsidiaries of the Company intend to buy and sell
Notes to create a secondary market for holders of the Notes, and to stabilize or
maintain the market price of the Notes. However, neither Smith Barney nor any of
such affiliates will be obligated to engage in any of these market activities,
or continue them once it has started.
Smith Barney will also be our agent (the "Calculation Agent") for purposes
of calculating the Starting Index Value, the Ending Index Value and the
Supplemental Redemption Amount and in determining whether a Market Disruption
Event has occurred. Potential conflicts of interest may exist between Smith
Barney and the holders of the Notes.
CAN YOU TELL ME MORE ABOUT THE COMPANY?
Salomon Smith Barney Holdings Inc. is a holding company with various
subsidiaries that conduct global investment banking and global securities and
commodities trading. The Company is a subsidiary of Travelers Group Inc.
("Travelers Group"), a diversified financial services holding company. For
information about the Company, see the section "The Company" in the Prospectus.
You should also read the other documents the Company has filed with the SEC,
which you can find by referring to the section "Where You Can Find More
Information" in the Prospectus.
The Common Stock of Travelers Group, the Company's parent, is one of the
components of the Dow Jones Index.
ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
Yes, the Notes are subject to a number of risks. Please refer to the
section "Risk Factors Relating to the Notes" in this Prospectus Supplement.
------------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the Securities and
Exchange Commission (the "Commission") pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (File No. 1-4346), are incorporated herein by
reference: (i) the Annual Report on Form 10-K for the year ended December 31,
1996, (ii) the Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997 and (iii) the Current Reports on Form
8-K filed on January 21, 1997, March 17, 1997, April 15, 1997, July 17, 1997,
September 24, 1997, September 29, 1997 (as amended by the Current Report on Form
8-K/A filed on October 28, 1997 and the Current Report on Form 8-K/A2 filed on
December 1, 1997), October 21, 1997, October 28, 1997 (as amended by the Current
Report on Form 8-K/A filed on December 1, 1997), November 21, 1997 (as amended
by the Current Report on Form 8-K/A filed on December 1, 1997), November 28,
1997, December 4, 1997, December 9, 1997, January 7, 1998, January 26, 1998,
January 27, 1998 and February 2, 1998. See "Incorporation of Certain Documents
by Reference" in the Prospectus. Such documents may also be accessed
electronically by means of the Commission's home page on the world wide web on
the internet at "http://www.sec.gov."
S-5
<PAGE> 6
RISK FACTORS RELATING TO THE NOTES
An investment in the Notes entails significant risks not associated with
similar investments in a conventional debt security, including the following.
COMPARISON TO OTHER SECURITIES
The Supplemental Redemption Amount May Be Zero. Unless the Ending Index
Value exceeds the closing value of the Dow Jones Index on the date of this
Prospectus Supplement (i.e., the Starting Index Value), the Supplemental
Redemption Amount will be ZERO. This may be true even if the value of the Dow
Jones Index exceeds the Starting Index Value at some time during the life of the
Notes but later falls below that threshold. If the Supplemental Redemption
Amount is zero, we will pay you only the principal amount of your Notes at
maturity.
The Ending Index Value Will Be Determined during the Eighteen Months prior
to Maturity. Because the Ending Index Value will be based upon the closing
value of the Dow Jones Index on the 1st of each month during the eighteen-month
period prior to maturity, a significant increase in the Index subsequent to
issuance may be substantially or entirely offset by subsequent decreases in the
value of the Index during or prior to the Calculation Period.
Because the Ending Index Value will equal the average of the closing values
of the Dow Jones Index on the 1st of each month during the eighteen-month
Calculation Period, a high Index value at the close of one or more months during
the Calculation Period may be substantially or entirely offset by a low Index
value at the close of one or more other months during such Period. In addition,
the full effect of increases in the value of the Index during the Calculation
Period will not be reflected in the Ending Index Value because a portion of the
Ending Index Value will be determined on the 1st of each month during such
eighteen-month Period.
No Interest. No interest is payable on the Notes or the principal amount
thereof, other than in connection with a default on payment at maturity or to
the extent that the Supplemental Redemption Amount exceeds zero and is deemed to
be an interest payment.
Yield May Be Lower than the Yield on a Standard Debt Note of Comparable
Maturity. The amount we pay you at maturity may be less than the return you
could earn on other investments. Because the Ending Index Value of the Dow Jones
Index may be less than, equal to or only slightly greater than the Starting
Index Value, the effective yield to maturity on the Notes (which is linked to
the amount by which such Ending Index Value exceeds the Starting Index Value)
may be less than that which would be payable on a conventional fixed-rate debt
security of the Company. In addition, any such return may not fully compensate
the holder for any opportunity cost implied by inflation and other factors
relating to the time value of money.
Return Does Not Reflect Dividends. Dow Jones calculates the Index by
reference to the prices of the common stocks comprising the Index without taking
into consideration the value of dividends paid on those stocks. Therefore, the
return you earn on the Notes, if any, will not be the same as the return that
you would have earned if you actually owned each of the stocks underlying the
Index and received the dividends paid on those stocks.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET
The Notes have been approved for listing on the CBOE, subject to official
notice of issuance. However, there can be no assurance as to whether there will
be a secondary market in the Notes or if there were to be such a secondary
market, whether such market would be liquid or illiquid. If the secondary market
for the Notes is limited, there may be a limited number of buyers when you
decide to sell your Notes if you do not wish to hold your investment until
maturity. This may affect the price you receive. There is currently no secondary
market for the Notes. It is expected that any secondary market for the Notes
will be affected by the creditworthiness of the Company and by a number of
factors, including, but not limited to, the volatility of the Dow Jones Index,
dividend rates on the stocks underlying the Index, the time remaining to the
maturity of the Notes and market interest rates. In addition, the Ending Index
Value depends on a number of interrelated factors, including economic, financial
and political events on or around the Calculation Dates, over which the
S-6
<PAGE> 7
Company has no control. The value of the Notes prior to maturity is expected to
depend primarily on the extent of the appreciation or depreciation of the Index
and market interest rates. The price at which a holder will be able to sell the
Notes prior to maturity may be at a discount, which could be substantial, from
the par amount thereof, if, at such time, the Index is less than, equal to, or
not sufficiently above the Starting Index Value.
RELATIONSHIP OF THE NOTES AND THE DOW JONES INDEX
The historical Dow Jones Index values should not be taken as an indication
of the future performance of the Index during the term of the Notes. While the
trading prices of the stocks underlying the Index will determine the value of
the Dow Jones Index, it is impossible to predict whether the value of the Index
will fall or rise. Trading prices of the stocks underlying the Dow Jones Index
will be influenced by both the complex and interrelated political, economic,
financial and other factors that can affect the capital markets generally and
the equity trading markets on which the underlying stocks are traded, and by
various circumstances that can influence the values of the underlying stocks in
a specific market segment or a particular underlying stock.
The policies of Dow Jones concerning additions, deletions and substitutions
of the stocks underlying the Dow Jones Index and the manner in which Dow Jones
takes account of certain changes affecting such underlying stock may affect the
value of the Index. The policies of Dow Jones with respect to the calculation of
the Index could also affect the value of the Index. Dow Jones may discontinue or
suspend calculation or dissemination of the Dow Jones Index or materially alter
the methodology by which it calculates the Index. Any such actions could affect
the value of the Notes. See "The Dow Jones Index" below.
FACTORS AFFECTING TRADING VALUE OF THE NOTES
The market value of the Notes will be affected by the value of the Index
and by a number of other factors. Some of these factors are interrelated in
complex ways; as a result, the effect of any one factor may be offset or
magnified by the effect of another factor. The following discussion describes
the expected impact on the market value of the Notes given a change in a
specific factor, assuming all other conditions remain constant.
Index Value. The market value of the Notes will likely depend
substantially on the amount, if any, by which the current Index value
exceeds the Starting Index Value. If you choose to sell your Notes when the
value of the Index exceeds the Starting Index Value (particularly if a
substantial period of time remains until maturity), you may receive
substantially less than the amount that would be payable at maturity based
on that Index value because of the expectation that the Index will continue
to fluctuate until the Ending Index Value is determined. If you choose to
sell your Notes when the value of the Index is below the Starting Index
Value, you can expect to receive less than the $15 principal amount per
Note (especially if a substantial period of time remains until maturity).
The effect of the current Index value on the market value of the Notes will
likely decrease significantly over time during the Calculation Period
because a portion of the Ending Index Value will be determined on each of
the eighteen Calculation Days during such Period.
Interest Rates. Because the Notes repay, at a minimum, the principal
amount at maturity, we expect that the trading value of the Notes will be
affected by changes in interest rates. In general, if U.S. interest rates
increase, the trading value of the Notes may be adversely affected. If U.S.
interest rates decrease, the trading value of the Notes may be favorably
affected.
Volatility of the Index. Volatility is the term used to describe the
size and frequency of market fluctuations. Because the Index is based on a
relatively small basket of common stocks, the value of the Index may be
subject to greater volatility. If the volatility of the Index increases,
the trading value of the Notes may be favorably affected. If the volatility
of the Index decreases, the trading value of the Notes may be adversely
affected. The effect of the volatility of the Index on the trading value of
the Notes is likely to decrease over time during the Calculation Period
because a portion of the Ending Index Value will be determined on the 1st
of each month during such eighteen-month Period.
S-7
<PAGE> 8
Time Remaining to Maturity. The Notes may trade at a value above that
which would be expected based on the level of interest rates and the Index
due to a "time premium" resulting from expectations concerning the value of
the Index during the eighteen-month Calculation Period prior to maturity of
the Notes. However, as the time remaining to maturity of the Notes
decreases, particularly during the eighteen-month Calculation Period, this
time premium may decrease, adversely affecting the trading value of the
Notes.
Dividend Yields. If dividend yields on the underlying stocks
comprising the Index increase, the value of the Notes may be adversely
affected since the Index does not incorporate the value of such payments.
Conversely, if dividend yields on the stocks comprising the Index decrease,
the value of the Notes may be favorably affected.
Company Credit Ratings, Financial Condition and Results. Real or
anticipated changes in the Company's credit ratings, financial condition or
results may affect the market value of the Notes.
Economic Conditions and Earnings Performance of Underlying
Companies. Real or anticipated changes in general economic conditions and
the earnings results of the companies whose common stocks comprise the
Index may affect the market value of the Notes.
We want you to understand that the impact of one of the factors specified
above, such as an increase in interest rates, may offset some or all of any
change in the trading value of the Notes attributable to another factor, such as
an increase in the Index value.
In general, assuming all relevant factors are held constant, we expect that
the effect on the trading value of the Notes of a given change in most of the
factors listed above will be less if it occurs later in the term of the Notes
than if it occurs earlier in the term of the Notes.
AFFILIATION OF THE COMPANY AND CALCULATION AGENT
Because the Calculation Agent is an affiliate of the Company, potential
conflicts of interest may exist between the Calculation Agent and the holders of
the Notes, including with respect to certain determinations and judgments that
the Calculation Agent must make in determining the Index Values or whether a
Market Disruption Event has occurred. See "Description of the Notes -- Market
Disruption Events," "-- Discontinuance of the Dow Jones Index" and
"-- Alteration of Method of Calculation" below. Smith Barney, as a registered
broker-dealer, is required to maintain policies and procedures regarding the
handling and use of confidential proprietary information, and such policies and
procedures will be in effect throughout the term of the Notes to restrict the
use of information relating to the calculation of the Index values that the
Calculation Agent may be required to make prior to their dissemination. Smith
Barney is obligated to carry out its duties and functions as Calculation Agent
in good faith and using its reasonable judgment. Smith Barney may also engage in
certain activities in connection with hedging the Company's obligation under the
Notes. See "Use of Proceeds and Hedging" in the accompanying Prospectus.
PURCHASES AND SALES BY AFFILIATES OF THE COMPANY
The Company, Smith Barney and other affiliates of the Company may from time
to time buy or sell the stocks underlying the Index for their own accounts in
connection with their normal business practices or in connection with hedging
the Company's obligations under the Notes. These transactions could affect the
price of such stocks and the value of the Index.
POTENTIAL FEDERAL INCOME TAX CONSEQUENCES
Because the Notes will be treated as contingent payment debt obligations of
the Company, and because by accepting a Note holders thereof agree to this
treatment of the Notes, U.S. holders of a Note will be required to include
original issue discount for U.S. federal income tax purposes ("Tax OID") in
gross income on a constant yield basis over the term of such Note. Such Tax OID
will be includible in a U.S. holder's gross income for U.S. federal income tax
purposes (as ordinary income) over the life of the Note, even though no payments
are to be made on the Note except at maturity. The amount of Tax OID is
calculated based (in
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<PAGE> 9
part) on an assumed amount payable at maturity. This assumed amount is neither a
prediction nor guarantee of the actual amount payable at maturity. Furthermore,
if the amount actually paid at maturity is, in fact, less than the assumed
amount payable at maturity, a U.S. holder will have recognized taxable income in
periods prior to maturity that exceed such holder's economic income from the
holding of the Note during such periods (with an offsetting ordinary loss at the
maturity of the Note). A U.S. holder will also be required to treat any gain
recognized upon a sale of a Note as ordinary income (rather than capital gain).
See "Certain United States Federal Income Tax Considerations" in this Prospectus
Supplement.
OTHER CONSIDERATIONS
If a bankruptcy proceeding is commenced in respect of the Company, the
claim of a holder of Notes may, under Section 502(b)(2) of Title 11 of the
United States Code, be limited to the principal amount of such Notes plus an
additional amount of contingent interest calculated as though the date of the
commencement of the proceeding were the maturity date of the Notes.
------------------------
We suggest that prospective investors who consider purchasing the Notes
reach an investment decision only after carefully considering the suitability of
the Notes in light of their particular circumstances.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus as the "Offered Securities") supplements
the description of the general terms and provisions of the Debt Securities set
forth in the Prospectus, to which description reference is hereby made. The
following summary of the Notes is qualified in its entirety by reference to the
Senior Debt Indenture referred to in the Prospectus.
GENERAL
The Equity Linked Notes based upon the Dow Jones Industrial Average(SM)
(the "Notes") are a series of Debt Securities issued under the Senior Debt
Indenture described in the accompanying Prospectus. The aggregate principal
amount of Notes issued will be limited to $39,000,000, subject to the
over-allotment option granted by the Company to the Underwriters (See
"Underwriting"). The Notes will mature on September 6, 2005, will constitute
part of the senior debt of the Company and will rank pari passu with all other
unsecured and unsubordinated debt of the Company. The Notes will be issued only
in fully registered form and in denominations of $15 and integral multiples
thereof.
The "Trustee" under the Senior Debt Indenture will be The Bank of New York
under an indenture dated as of October 27, 1993, as supplemented by a first
supplemental indenture, dated as of November 28, 1997, and as further
supplemented from time to time. A copy of the Senior Debt Indenture under which
The Bank of New York serves as Trustee has been filed with the Commission as an
exhibit to the Registration Statement of which the accompanying Prospectus forms
a part and is hereby incorporated by reference as part of the Registration
Statement. Section numbers in The Bank of New York Indenture take the form
"1.01," "2.01" and so forth, rather than "101," "201" and so forth. Section
references in the accompanying Prospectus should be read accordingly.
Reference is made to the accompanying Prospectus for a detailed summary of
additional provisions of the Notes and of the Senior Debt Indenture under which
the Notes will be issued.
INTEREST
No interest is payable on the Notes or the principal amount thereof, other
than in connection with a default on payment at maturity or to the extent that
the Supplemental Redemption Amount exceeds zero and is deemed to be an interest
payment.
S-9
<PAGE> 10
REDEMPTION; DEFEASANCE
The Notes are not subject to redemption by the Company or at the option of
any holder prior to maturity and are not subject to the defeasance provisions
described in the accompanying Prospectus under "Description of Debt
Securities -- Defeasance."
PAYMENT AT MATURITY
At maturity (including as a result of acceleration or otherwise), a holder
of a Note will be entitled to receive the principal amount thereof plus a
Supplemental Redemption Amount, if any, as provided below. If the Ending Index
Value does not exceed the Starting Index Value, the holder of a Note will be
entitled to receive only the principal amount thereof. The principal amount will
equal $15 per Note.
DETERMINATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
The Supplemental Redemption Amount for each Note ($15 principal amount)
will be determined by the Calculation Agent and will equal:
Ending Index Value -- Starting Index Value
$15 X ------------------------------------------ X Participation Rate
Starting Index Value
provided that in no event will the Supplemental Redemption Amount be less than
zero. As indicated in the formula above, the Supplemental Redemption Amount for
the Notes will be calculated using the principal amount of the Notes.
The Participation Rate equals 102.5%. The Starting Index Value equals
8490.67, which was the closing value of the Dow Jones Index on February 26,
1998. The Ending Index Value will be determined by the Calculation Agent and
will equal the average of the closing values of the Dow Jones Index on each of
the eighteen Calculation Days during the Calculation Period. If the 1st of any
month during the Calculation Period is not a Calculation Day because it is not a
Business Day or due to the occurrence of one or more Market Disruption Events,
then the Index value for that month of the Calculation Period will equal the
closing value of the Dow Jones Index determined on the next Business Day on
which no Market Disruption Event exists, except that if September 1, 2005 is not
a Calculation Day for any such reason, then the Index value for September 2005
will equal the closing value of the Index determined on the immediately
preceding Business Day on which no Market Disruption Event exists. The
"Calculation Period" means the period from and including the date eighteen
months prior to maturity to but excluding the maturity date. "Calculation Day"
means the 1st of each month during the Calculation Period, provided that such
day is a Business Day and no Market Disruption Event has occurred on such day.
For purposes of determining the Ending Index Value, a "Business Day" is a day on
which the NYSE and the American Stock Exchange are open for trading and the
Index or any Successor Index, as defined below, is calculated and published. All
determinations made by the Calculation Agent shall be at the sole discretion of
the Calculation Agent and shall be binding on the Company and beneficial owners
of the Notes, absent manifest error.
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<PAGE> 11
HYPOTHETICAL RETURNS
The following table illustrates the hypothetical returns for each $15
principal amount of Notes, on a pretax basis, assuming various percentage
changes in the Index:
<TABLE>
<CAPTION>
PRETAX RATE
TOTAL TOTAL AMOUNT TOTAL RATE OF PRETAX RATE OF RETURN ON
PERCENTAGE CHANGE HYPOTHETICAL ENDING PAYABLE AT MATURITY RETURN ON OF RETURN ON STOCKS UNDERLYING
OF INDEX VALUE INDEX VALUE(1) FOR $15 UNIT THE NOTES THE NOTES(2) THE INDEX(2)(3)
- ----------------- ------------------- ------------------- ------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
-30.0% 6,184.04 15.00 0.00% 0.00% -2.96%
-20.0% 6,952.92 15.00 0.00% 0.00% -1.22%
-10.0% 7,721.79 15.00 0.00% 0.00% 0.34%
0.0% 8,490.67(4) 15.00 0.00% 0.00% 1.75%
10.0% 9,259.55 16.39 9.28% 1.18% 3.04%
20.0% 10,028.42 17.78 18.56% 2.28% 4.22%
30.0% 10,797.30 19.18 27.85% 3.30% 5.31%
40.0% 11,566.18 20.57 37.13% 4.25% 6.33%
50.0% 12,335.06 21.96 46.41% 5.14% 7.29%
60.0% 13,103.93 23.35 55.69% 5.98% 8.19%
70.0% 13,872.81 24.75 64.97% 6.77% 9.04%
80.0% 14,641.69 26.14 74.26% 7.53% 9.85%
90.0% 15,410.57 27.53 83.54% 8.25% 10.61%
100.0% 16,179.44 28.92 92.82% 8.93% 11.34%
110.0% 16,948.32 30.32 102.10% 9.59% 12.04%
120.0% 17,717.20 31.71 111.38% 10.21% 12.71%
130.0% 18,486.08 33.10 120.67% 10.81% 13.35%
140.0% 19,254.95 34.49 129.95% 11.39% 13.97%
</TABLE>
- ---------------
(1) The Ending Index Value, for purposes of calculating the Supplemental
Redemption Amount at maturity, will be equal to the average of the Index
values on each of the Calculation Days during the Calculation Period. The
Calculation Period, for purposes of this illustration, consists of the
eighteen monthly Calculation Days up to and including maturity.
(2) These rates of return are calculated on a semi-annual bond-equivalent basis.
(3) These rates of return assume: (a) an investment of a fixed amount in the
stocks underlying the Index with the allocation of such amounts reflecting
the relative weight of such stocks in the Index; (b) the Index value
increases or decreases linearly from the Starting Index Value; (c) a
constant dividend yield of 1.75% per annum, paid quarterly from the date of
receipt by investors of the Notes, applied to the value of the Index at the
beginning of each such quarter assuming such value increases or decreases
linearly from the Starting Index Value; (d) no transaction fees or expenses;
(e) a term for the Notes from March 4, 1998 to September 6, 2005; and (f) a
final Index Value equal to the Total Percentage Change of Index Value
applied to the Starting Index Value. The aggregate dividend yield of the
stocks underlying the Index as of February 26, 1998 was 1.64%.
(4) The Starting Index Value.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the total and pretax
rate of return resulting therefrom will depend entirely on the actual Ending
Index Value determined by the Calculation Agent as provided herein. Historical
data regarding the Dow Jones Index is included in this Prospectus Supplement
under "The Index -- Historical Data on the Index."
MARKET DISRUPTION EVENTS
"Market Disruption Event" means any of the following events, as determined
by the Calculation Agent.
(a) The suspension or material limitation of trading in 20% or more of
the underlying stocks which then comprise the Dow Jones Index or any
Successor Index, in each case, for more than two hours of trading or during
the one-half hour period preceding the close of trading on the NYSE or any
other
S-11
<PAGE> 12
applicable organized U.S. exchange. For purposes of this definition,
limitations on trading during significant market fluctuations imposed
pursuant to NYSE Rule 80B (or any applicable rule or regulation enacted or
promulgated by the NYSE, any other self regulatory organization or the SEC
of similar scope or as a replacement for Rule 80B, as determined by the
Calculation Agent) shall be considered "material."
(b) The suspension or material limitation, in each case, for more than
two hours of trading or during the one-half hour period preceding the close
of trading (whether by reason of movements in price otherwise exceeding
levels permitted by the relevant exchange or otherwise) in (A) futures
contracts related to the Index or options on such futures contracts which
are traded on any major U.S. exchange or (B) options contracts related to
the Index which are traded on any major U.S. exchange.
(c) The unavailability, through a recognized system of public
dissemination of transaction information, for more than two hours of
trading or during the one-half hour period preceding the close of trading,
of accurate price, volume or related information in respect of 20% or more
of the underlying stocks which then comprise the Dow Jones Index or any
Successor Index or in respect of futures contracts related to the Index,
options on such futures contracts or options contracts related to the
Index, in each case traded on any major U.S. exchange.
For purposes of determining whether a Market Disruption Event has occurred:
(1) a limitation on the hours or number of days of trading will not constitute a
Market Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange or market, (2) a decision to discontinue
permanently trading in the relevant futures or options contract will not
constitute a Market Disruption Event, (3) any suspension in trading in a futures
or options contract on the Index by a major securities market by reason of (x) a
price change violating limits set by such securities market, (y) an imbalance of
orders relating to such contracts or (z) a disparity in bid and ask quotes
relating to such contracts, will constitute a suspension or material limitation
of trading in futures or options contracts related to the Dow Jones Index,
notwithstanding that such suspension or material limitation is less than two
hours, and (4) a "suspension or material limitation" on an exchange or in a
market will include a suspension or material limitation of trading by one class
of investors provided that such suspension continues for more than two hours of
trading or during the last one-half hour period preceding the close of trading
on the relevant exchange or market (but will not include limitations imposed on
certain types of trading under NYSE Rule 80A) and will not include any time when
such exchange or market is closed for trading as part of such exchange's or
market's regularly scheduled business hours. Under certain circumstances, the
duties of Smith Barney as Calculation Agent in determining the existence of
Market Disruption Events could conflict with the interests of Smith Barney as an
affiliate of the issuer of the Notes.
Based on the information currently available to the Company, on October 27,
1997, the NYSE suspended all trading during the one-half hour period preceding
the close of trading, pursuant to NYSE Rule 80B. On April 3, 1992, no trading
took place on the Chicago Mercantile Exchange (the "CME"), as a flood that
severely affected the operations of many of the CME's member institutions caused
the CME to suspend trading (including trading in futures or options contracts on
the Index) for the entire day. If either of these suspensions of trading had
occurred during the term of the Notes, such event would have constituted a
Market Disruption Event. The existence or non-existence of such circumstances,
however, is not necessarily indicative of the likelihood of such circumstances
arising or not arising in the future.
DISCONTINUANCE OF THE DOW JONES INDEX
If Dow Jones discontinues publication of the Dow Jones Index and Dow Jones
or another entity publishes a successor or substitute index that the Calculation
Agent determines, in its sole discretion, to be comparable to such Index (any
such index being referred to hereinafter as a "Successor Index"), then the
Ending Index Value shall be determined by reference to the value of such
Successor Index using the methodology described above under "-- Payment at
Maturity" and "-- Determination of the Supplemental Redemption Amount."
S-12
<PAGE> 13
Upon any selection by the Calculation Agent of a Successor Index, the
Company shall cause notice thereof to be furnished to the Trustee, who shall
provide notice thereof to the holders of the Notes.
If Dow Jones discontinues calculation or publication of the Index and a
Successor Index is not selected by the Calculation Agent or is no longer
published on any Calculation Day, the value to be substituted for the Index for
any such Calculation Day used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the Calculation Agent for such Calculation
Day in accordance with the procedures last used to calculate the Index prior to
any such discontinuance.
If Dow Jones discontinues publication of the Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
Calculation Agent determines that no Successor Index is available at such time,
then on each Business Day until the earlier to occur of (a) the determination of
the Ending Index Value and (b) a determination by the Calculation Agent that a
Successor Index is available, the Calculation Agent shall determine the value
that would be used in computing the Supplemental Redemption Amount as described
in the preceding paragraph as if such day were a Calculation Day. The
Calculation Agent will cause notice of each such value to be published not less
often than once each month in the WSJ (or another newspaper of general
circulation), and arrange for information with respect to such values to be made
available by telephone. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Index may adversely affect trading in
the Notes.
If a Successor Index is selected or the Calculation Agent calculates a
value as a substitute for the Dow Jones Index as described above, such Successor
Index or value shall be substituted for the Dow Jones Index for all purposes,
including for purposes of determining whether a Market Disruption Event exists.
Notwithstanding these alternative arrangements, discontinuance of the
publication of the Dow Jones Index may adversely affect the value of the Notes.
ALTERATION OF METHOD OF CALCULATION
If at any time the method of calculating the Dow Jones Index or a Successor
Index, or the value thereof, is changed in any material respect, or if the Index
or a Successor Index is in any other way modified so that such Index does not,
in the opinion of the Calculation Agent, fairly represent the value of the Index
or such Successor Index had such changes or modifications not been made, then,
from and after such time, the Calculation Agent shall, at the close of business
in New York, New York, on each date that the closing value with respect to the
Ending Index Value is to be calculated, make such adjustments as, in the good
faith judgment of the Calculation Agent, may be necessary in order to arrive at
a calculation of a value of a stock index comparable to the Index or such
Successor Index as if changes or modifications had not been made, and calculate
such closing value with reference to the Index, as adjusted. Accordingly, if the
method of calculating the Index or such Successor Index is modified so that the
value of such Index or such Successor Index is a fraction or a multiple of what
it would have been if it had not been modified (e.g., due to a split in such
Index), then the Calculation Agent shall adjust such Index in order to arrive at
a value of such Index as if it had not been modified (e.g., as if such split had
not occurred).
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Notes shall have occurred
and be continuing, the amount declared due and payable upon any acceleration of
the Notes will be determined by the Calculation Agent and will equal, for each
Note, the principal amount plus the Supplemental Redemption Amount, if any,
calculated as though the date of early repayment were the stated maturity date
of the Notes. See "-- Determination of the Supplemental Redemption Amount"
above. If a bankruptcy proceeding is commenced in respect of the Company, the
claim of the beneficial owner of a Note may be limited, under Section 502(b)(2)
of Title 11 of the United States Code, to the principal amount of the Note plus
an additional amount of contingent interest calculated as though the date of the
commencement of the proceeding were the maturity date of the Notes.
In case of default in payment at the maturity date of the Notes (whether at
their stated maturity or upon acceleration), from and after the maturity date
the Notes shall bear interest, payable upon demand of the
S-13
<PAGE> 14
beneficial owners thereof, at the rate of 6.28% per annum (to the extent that
payment of such interest shall be legally enforceable) on the unpaid amount due
and payable on such date in accordance with the terms of the Notes to the date
payment of such amount has been made or duly provided for.
BOOK-ENTRY SYSTEM
Upon issuance, all Notes will be represented by one or more
fully-registered global securities (the "Global Notes"). Each such Global Note
will be deposited with, or on behalf of, The Depository Trust Company (the
"Depositary"), and registered in the name of the Depositary or a nominee
thereof. Unless and until it is exchanged in whole or in part for Notes in
definitive form, no Global Note may be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor of the Depositary or a nominee of such successor.
Accountholders in the Euroclear or Cedel Bank clearance systems may hold
beneficial interests in the Notes through the accounts each such system
maintains as a participant in the Depositary.
The Depositary has advised the Company as follows: the Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
banking organization within the meaning of the New York Banking Law, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code and a "clearing agency" registered pursuant to
the provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Depositary was created to hold securities of its participants and
to facilitate the clearance and settlement of transactions among its
participants in such securities through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depositary's participants include securities
brokers and dealers (including the Underwriters), banks, trust companies,
clearing corporations, and certain other organizations, some of whom (and/or
their representatives) own the Depositary.
Access to the Depositary's book-entry system is also available to others,
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
A further description of the Depositary's procedures with respect to the
Global Notes is set forth in the Prospectus under "Description of Debt
Securities -- Global Notes." The Depositary has confirmed to the Company, the
Underwriters and the Trustee that it intends to follow such procedures.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in same-day
funds. All payments of principal and the Supplemental Redemption Amount, if any,
will be made by the Company in same-day funds so long as the Notes are
maintained in book-entry form.
CALCULATION AGENT
The "Calculation Agent" for the Notes will be Smith Barney. All
determinations made by the Calculation Agent shall be at the sole discretion of
the Calculation Agent and shall, in the absence of manifest error, be conclusive
for all purposes and binding on the Company and holders of the Notes. Because
the Calculation Agent is an affiliate of the Company, potential conflicts of
interest may exist between the Calculation Agent and the holders of the Notes,
including with respect to certain determinations and judgments that the
Calculation Agent must make in determining the Index Values or whether a Market
Disruption Event has occurred. See "-- Market Disruption Events,"
"-- Discontinuance of the Dow Jones Index" and "-- Alteration of Method of
Calculation" above. Smith Barney is obligated to carry out its duties and
functions as Calculation Agent in good faith and using its reasonable judgment.
S-14
<PAGE> 15
THE DOW JONES INDEX
GENERAL
Unless otherwise stated, all information herein on the Index is derived
from Dow Jones or other publicly available sources. Such information reflects
the policies of Dow Jones as stated in such sources and such policies are
subject to change by Dow Jones. Dow Jones is under no obligation to continue to
publish the Index and may discontinue publication of the Index at any time.
The Index is a price-weighted index (i.e., the weight of a component stock
in the Index is based on its price per share rather than the total market
capitalization of the issuer of such component stock) comprised of 30 common
stocks chosen by the editors of the WSJ as representative of the broad market of
U.S. industry. The corporations represented in the Index tend to be leaders
within their respective industries and their stocks are typically widely held by
individuals and institutional investors. Changes in the composition of the Index
are made entirely by the editors of the WSJ without consultation with the
corporations represented in the Index, any stock exchange, any official agency
or the Company. Changes to the common stocks included in the Index tend to be
made infrequently. Historically, most substitutions have been the result of
mergers, but from time to time, changes may be made to achieve what the editors
of the WSJ deem to be a more accurate representation of the broad market of U.S.
industry. In choosing a new corporation for the Index, the editors of the WSJ
look for leading industrial companies with a successful history of growth and
wide interest among investors. The component stocks of the Index may be changed
at any time for any reason. Dow Jones, publisher of the WSJ, is not affiliated
with the Company and has not participated in any way in the creation of the
Notes.
The Index initially consisted of twelve common stocks and was first
published in the WSJ in 1896. The Index was increased to include 20 common
stocks in 1916 and to 30 common stocks in 1928. The number of common stocks in
the Index has remained at 30 since 1928, and, in an effort to maintain
continuity, the constituent corporations represented in the Index have been
changed on a relatively infrequent basis.
The value of the Index is the sum of the primary exchange prices of each of
the 30 common stocks included in the Index, divided by a divisor that is
designed to provide meaningful continuity in the value of the Index. Because the
Index is price-weighted, stock splits or changes in the component stocks could
result in distortions in the Index value. In order to prevent such distortions
related to extrinsic factors, the divisor is changed in accordance with a
mathematical formula that reflects adjusted proportions within the Index. The
current divisor of the Index is published daily in the WSJ and other
publications. In addition, other statistics based on the Index may be found in a
variety of publicly available sources.
The Company or its affiliates may presently or from time to time engage in
business with Dow Jones or one or more of the issuers of the component stocks of
the Index, including extending loans to, or making equity investments in, Dow
Jones or such issuers or providing advisory services to such issuers, including
merger and acquisition advisory services. In the course of such business with
issuers, the Company or its affiliates may acquire non-public information with
respect to such issuers. The Company may also act as market maker for the common
stocks of such issuers. The Company does not make any representation to any
purchaser of Notes with respect to any matters whatsoever relating to Dow Jones
or such issuers. Any prospective purchaser of Notes should undertake an
independent investigation of the issuers of the component stocks of the Index
and with respect to the competency of Dow Jones to formulate and calculate the
Index as in its judgment is appropriate to make an informed decision with
respect to an investment in the Notes. The composition of the Index does not
reflect any investment or sell recommendations of the Company or its affiliates.
HISTORICAL DATA ON THE INDEX
The following table sets forth the closing level of the Index at the end of
each month in the period from January 1992 through December 1997, as published
by the WSJ. This historical data on the Index is not necessarily indicative of
the future performance of the Index or what the value of the Notes may be. Any
S-15
<PAGE> 16
historical upward or downward trend in the closing level of the Index during any
period set forth below is not any indication that the Index is more or less
likely to decline at any time during the term of the Notes.
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
January................ 3223.39 3310.03 3978.36 3843.86 5395.30 6813.09
February............... 3267.67 3370.81 3832.02 4011.05 5485.62 6877.74
March.................. 3235.47 3435.11 3635.96 4157.69 5587.14 6583.48
April.................. 3359.12 3427.55 3681.69 4321.27 5569.08 7008.99
May.................... 3396.88 3527.43 3758.37 4465.14 5643.18 7331.04
June................... 3318.52 3516.08 3624.96 4556.10 5654.63 7672.79
July................... 3393.78 3539.47 3764.50 4708.47 5528.91 8222.61
August................. 3257.35 3651.25 3913.42 4610.56 5616.21 7622.42
September.............. 3712.66 3555.12 3843.19 4789.08 5882.17 7945.26
October................ 3226.28 3680.59 3908.12 4755.48 6029.38 7442.08
November............... 3305.16 3683.95 3739.23 5074.49 6521.70 7823.13
December............... 3301.11 3754.09 3834.44 5117.12 6448.27 7908.25
</TABLE>
The closing value of the Index at the end of January 1998 was 7906.50. The
closing value of the Index on February 26, 1998 was 8490.67.
The following table sets forth the closing values of the Index on the last
business day of each year from 1945 through 1997, as published by the WSJ. The
historical experience of the Index should not be taken as an indication of
future performance and no assurance can be given that the value of the Index
will not decline and thereby reduce the Supplemental Redemption Amount, if any,
which may be payable to beneficial owners of Notes at maturity or otherwise.
YEAR-END VALUE OF THE INDEX
<TABLE>
<CAPTION>
YEAR-END YEAR-END YEAR-END YEAR-END
YEAR CLOSING VALUE YEAR CLOSING VALUE YEAR CLOSING VALUE YEAR CLOSING VALUE
- ----- ------------- ---- ------------- ---- ------------- ---- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1945 192.91 1959 679.36 1973 850.86 1987 1938.83
1946 177.20 1960 615.89 1974 616.24 1988 2168.57
1947 181.16 1961 731.14 1975 852.41 1989 2753.20
1948 177.30 1962 652.10 1976 1004.65 1990 2633.66
1949 200.52 1963 762.95 1977 831.17 1991 3168.83
1950 235.42 1964 874.13 1978 805.01 1992 3301.11
1951 269.23 1965 969.26 1979 838.74 1993 3754.09
1952 291.90 1966 785.69 1980 963.99 1994 3834.44
1953 280.90 1967 905.11 1981 875.00 1995 5117.12
1954 404.39 1968 943.75 1982 1046.54 1996 6448.27
1955 488.40 1969 800.36 1983 1258.64 1997 7908.25
1956 499.47 1970 838.92 1984 1211.57
1957 435.69 1971 890.20 1985 1546.67
1958 583.65 1972 1020.02 1986 1895.95
</TABLE>
S-16
<PAGE> 17
HISTORICAL YEAR-END CLOSING VALUES
The following graph illustrates the historical performance of the Index
based on the closing value thereof at the end of each year from 1945 through
1997. Past movements of the Index are not necessarily indicative of future Index
values.
CLOSING LEVEL OF THE DOW JONES INDUSTRIAL AVERAGE(SM)
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Year-End Closing Value
<S> <C>
1945 192.91
1946 177.20
1947 181.16
1948 177.30
1949 200.52
1950 235.42
1951 269.23
1952 291.90
1953 280.90
1954 404.39
1955 488.40
1956 499.47
1957 435.69
1958 583.65
1959 679.36
1960 615.89
1961 731.14
1962 652.10
1963 762.95
1964 874.13
1965 969.26
1966 785.69
1967 905.11
1968 943.75
1969 800.36
1970 838.92
1971 890.20
1972 1020.02
1973 850.86
1974 616.24
1975 852.41
1976 1004.65
1977 831.17
1978 805.01
1979 838.74
1980 963.99
1981 875.00
1982 1046.54
1983 1258.64
1984 1211.57
1985 1546.67
1986 1895.95
1987 1938.83
1988 2168.57
1989 2753.20
1990 2633.66
1991 3168.83
1992 3301.11
1993 3754.09
1994 3834.44
1995 5117.12
1996 6448.27
1997 7908.25
</TABLE>
END OF YEAR
LICENSE AGREEMENT
The Notes are not sponsored, endorsed, sold or promoted by Dow Jones. Dow
Jones makes no representation or warranty, express or implied, to the owners of
the Notes or any member of the public regarding the advisability of investing in
securities generally or in the Notes particularly. Dow Jones' only relationship
to the Company is the licensing of certain trademarks, trade names and service
marks of Dow Jones and of the Dow Jones Industrial Average(SM), which is
determined, composed and calculated by Dow Jones without regard to the Company
or the Notes. Dow Jones has no obligation to take the needs of the Company or
the owners of the Notes into consideration in determining, composing or
calculating the Dow Jones Industrial Average(SM). Dow Jones is not responsible
for and has not participated in the determination of the timing of, prices at,
or quantities of the Notes to be issued or in the determination or calculation
of the equation by which the Notes are to be converted into cash. Dow Jones has
no obligation or liability in connection with the administration, marketing or
trading of the Notes.
DOW JONES(SM) DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF
THE DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN AND DOW JONES
SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW
JONES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE
COMPANY, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. DOW JONES MAKES
NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE
DOW JONES INDUSTRIAL AVERAGE(SM) OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES HAVE ANY LIABILITY FOR ANY
LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES, EVEN IF
NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OF
ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DOW JONES AND THE COMPANY.
S-17
<PAGE> 18
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain United States federal income
tax considerations that may be relevant to a holder of a Note. This summary is
based on laws, regulations, rulings and decisions now in effect, all of which
are subject to change (possibly with retroactive effect) and to differing
interpretations. Furthermore, there can be no assurance that the Internal
Revenue Service would not take a position contrary to those expressed herein.
This summary deals only with holders that will hold Notes as capital assets, and
does not address all aspects of U.S. federal income taxation that may be
applicable to investors in light of their particular circumstances, or to
investors subject to special treatment under U.S. federal income tax law
(including, but not limited to, financial institutions, tax-exempt entities,
insurance companies or dealers in securities or currencies, persons having a
functional currency other than the U.S. dollar, persons holding the Notes as a
position in a "straddle" or conversion transaction, or as part of a "synthetic
security" or other integrated financial transaction). This summary also does not
address the state, local or foreign tax consequences of an investment in the
Notes. The discussion below is based on the advice of Cleary, Gottlieb, Steen &
Hamilton, counsel to the Company.
Investors should consult their own tax advisors in determining the tax
consequences to them of holding Notes, including the application to their
particular situation of the U.S. federal income tax considerations discussed
below.
As used herein, the term "U.S. holder" means a person who is a citizen or
resident of the United States, or that is a corporation, partnership or other
entity created or organized in or under the laws of the United States or any
political subdivision thereof, an estate the income of which is subject to
United States federal income taxation regardless of its source or a trust if (i)
a U.S. court is able to exercise primary supervision over the trust's
administration and (ii) one or more U.S. persons have the authority to control
all of the trust's substantial decisions.
TAX CHARACTERIZATION OF THE NOTES
Each Note will be treated by the Company for U.S. federal income tax
purposes as a single debt instrument issued by the Company that is subject to
U.S. Treasury regulations governing contingent debt instruments (the "Contingent
Debt Regulations"). Moreover, each holder, by accepting a Note, agrees to this
treatment of such Note and to report all income (or loss) with respect to the
Notes in accordance with the Contingent Debt Regulations. The remainder of this
summary assumes the treatment of the Note as a single debt instrument subject to
the Contingent Debt Regulations and the holder's agreement thereto.
U.S. HOLDERS
Taxation of Interest. A U.S. holder of a Note will recognize income (or
loss) on a Note in accordance with the Contingent Debt Regulations. The
Contingent Debt Regulations require the application of a "noncontingent bond
method" to determine accruals of income, gain, loss and deduction with respect
to a contingent debt obligation. As described in more detail in the second
succeeding paragraph, under the noncontingent bond method, a U.S. holder of a
Note will be required for tax purposes to include in income each year an accrual
of interest at the rate of 6.28 percent (the "comparable yield"). Solely for
purposes of determining the comparable yield pursuant to the Contingent Debt
Regulations, a holder of a Note will be assumed to be entitled to receive, in
respect of such Note, a payment of $8.7145 on the maturity date (the "Assumed
Supplemental Redemption Amount"). The Assumed Supplemental Redemption Amount is
calculated as the amount required to produce the comparable yield of a Note,
taking into account the Note's issue price.
The comparable yield and the Assumed Supplemental Redemption Amount are
used to determine accruals of interest for tax purposes only and are not
assurances or predictions by the Company with respect to the actual yield of, or
payment to be made in respect of, a Note. The comparable yield and the Assumed
Supplemental Redemption Amount do not necessarily represent the Company's
expectations regarding such yield or the amount of such payment.
S-18
<PAGE> 19
Each Note will be issued at par. However, there will be original issue
discount on each Note for U.S. federal income tax purposes ("Tax OID") because
Tax OID must be accrued at the comparable yield. Under the Tax OID rules of the
Internal Revenue Code of 1986, as amended (the "Code"), and the Treasury
regulations promulgated thereunder, a U.S. holder of a Note, whether such holder
uses the cash or the accrual method of tax accounting, will be required to
include as ordinary interest income the sum of the "daily portions" of Tax OID
on the Note for all days during the taxable year that the U.S. holder owns the
Note. As a result, a U.S. holder of a Note that employs the cash method of tax
accounting will be required to include amounts in respect of Tax OID accruing on
a Note in taxable income each year, even though cash payment on the Note is only
at maturity.
The daily portions of Tax OID on a Note are determined by allocating to
each day in any accrual period a ratable portion of the Tax OID allocable to
that accrual period. In the case of an initial holder, the amount of Tax OID on
a Note allocable to each accrual period is determined by multiplying the
"adjusted issue price" (as defined below) of a Note at the beginning of the
accrual period by the comparable yield of a Note (appropriately adjusted to
reflect the length of the accrual period). The "adjusted issue price" of a Note
at the beginning of any accrual period will generally be the sum of its issue
price and the amount of Tax OID allocable to all prior accrual periods.
Disposition of the Notes. When a U.S. holder sells, exchanges or otherwise
disposes of a Note (including the redemption of the Note at maturity) (a
"disposition"), the U.S. holder's gain (or loss) on such disposition will equal
the difference between the amount received by the U.S. holder for the Note and
the U.S. holder's tax basis in the Note. Upon a Note's maturity, if there is a
payment of a Supplemental Redemption Amount and such Supplemental Redemption
Amount exceeds the Assumed Supplemental Redemption Amount, the U.S. holder will
be required to include such excess in income as ordinary interest on the
maturity date. Alternatively, if there is a payment of a Supplemental Redemption
Amount and such Supplemental Redemption Amount is less than the Assumed
Supplemental Redemption Amount, the shortfall will be treated as an offset to
any interest otherwise includible in income by the U.S. holder with respect to
the Note for the taxable year in which the maturity date occurs but only to the
extent of the amount of such includible interest. Any remaining portion of such
shortfall may be recognized and deducted by the U.S. holder as an ordinary loss.
A U.S. holder's tax basis (i.e., adjusted cost) in a Note will be equal to the
U.S. holder's original purchase price for such Note, plus any Tax OID accrued by
the U.S. holder. Any gain realized by a U.S. holder on a disposition will be
treated as ordinary interest income. Any loss realized by a U.S. holder on a
disposition will be treated as ordinary loss, to the extent of the U.S. holder's
Tax OID inclusions with respect to the Note up to the date of disposition. Any
loss realized in excess of such amount generally will be treated as a capital
loss. An individual U.S. holder generally will be allowed a deduction for any
such ordinary loss without regard to the two-percent miscellaneous itemized
deduction rule of section 67 of the Code. Any capital loss recognized by a U.S.
holder will be a long-term capital loss if such U.S. holder has held such Note
for more than one year, and a short-term capital loss in other cases.
Prospective individual investors should consult their tax advisers to determine
the consequences to them of the changes in the treatment of capital losses
introduced by the Taxpayer Relief Act of 1997.
A U.S. holder that purchases a Note in the secondary market for an amount
that differs from the Note's adjusted issue price at the time of purchase will
be required to accrue Tax OID on the Note in accordance with the comparable
yield and Assumed Supplemental Redemption Amount, even if market conditions have
changed since the date of issuance. A U.S. holder must determine whether the
difference between the purchase price for a Note and the adjusted issue price of
the Note is attributable to a change in expectations as to the Supplemental
Redemption Amount, a change in interest rates, or both, and allocate the
difference accordingly. Adjustments allocated to a change in interest rates will
cause, as the case may be, a "positive adjustment" or a "negative adjustment" to
the U.S. holder's Tax OID inclusion. If the adjusted issue price is more than
the purchase price for the Note, a "positive adjustment" will result, and if the
adjusted issue price is less than the purchase price of the Note, a "negative
adjustment" will result. If the difference between a U.S. holder's purchase
price for a Note and the adjusted issue price of the Note is attributable to a
change in expectations as to the Supplemental Redemption Amount (and not to a
change in market interest rates), the U.S. holder will be required to allocate
that difference to the Supplemental Redemption Amount. Adjust-
S-19
<PAGE> 20
ments allocated to the Supplemental Redemption Amount are taken into account at
the time the Supplemental Redemption Amount is paid. If the purchaser's tax
basis in a Note is greater than the adjusted issue price of the Note, the excess
is treated as a "negative adjustment" that reduces the Supplemental Redemption
Amount; if the purchaser's tax basis in a Note is less than the adjusted issue
price of the Note, the difference is treated as a "positive adjustment" that
increases the Supplemental Redemption Amount. Any negative or positive
adjustment of the kind described above made by a U.S. holder of a Note will
decrease or increase, respectively, the U.S. holder's tax basis in the Note.
Certain U.S. holders may receive Forms 1099-OID reporting Tax OID accruals
on a Note. Those forms may not, however, reflect the effects of any positive or
negative adjustments resulting from the U.S. holder's purchase of the Note in
the secondary market at a price that differs from its adjusted issue price on
the date of purchase. U.S. holders are urged to consult their tax advisors as to
whether, and how, such adjustments should be made to the amounts reported on any
Form 1099-OID.
Information Reporting and Backup Withholding. A noncorporate U.S. holder
may be subject to information reporting and to backup withholding at a rate of
31 percent with respect to payments of principal, premium and interest
(including Tax OID) made on a Note, or the proceeds of a disposition of a Note
before maturity, unless such U.S. holder provides proof of an applicable
exemption or a correct taxpayer identification number, and otherwise complies
with applicable requirements of the information reporting and backup withholding
rules.
NON-U.S. HOLDERS
Taxation of Interest and Disposition of the Notes. Under current U.S.
federal income tax law: (a) payment of a Supplemental Redemption Amount to a
holder who is not a U.S. holder (a "non-U.S. holder") will not be subject to
withholding of U.S. federal income tax, provided that (i) the holder does not
actually or constructively own 10 percent or more of the combined voting power
of all classes of stock of the Company and is not a controlled foreign
corporation related to the Company through stock ownership and (ii) the
beneficial owner provides a statement signed under penalties of perjury that
includes its name and address and certifies that it is a non-U.S. holder in
compliance with applicable requirements or, with respect to payments made after
December 31, 1998, satisfies certain documentary evidence requirements for
establishing that it is a non-U.S. holder; and (b) a non-U.S. holder will not be
subject to U.S. federal income tax on gain realized on the disposition of a
Note. Notwithstanding the above, a non-U.S. holder that is subject to U.S.
federal income taxation on a net income basis with respect to its income from a
Note generally will be subject to the same rules to which a U.S. holder is
subject with respect to the accrual of interest (including Tax OID) on a Note
and with respect to gain or loss realized or recognized on the disposition of a
Note. Special rules might also apply to a non-U.S. holder that is a qualified
resident of a country with which the U.S. has an income tax treaty.
Information Reporting and Backup Withholding. U.S. information reporting
requirements and backup withholding tax will not apply to payments on, or
proceeds from the disposition of, a Note if the beneficial owner certifies its
non-U.S. status under penalties of perjury (or, with respect to payments made
after December 31, 1998, satisfies certain documentary evidence requirements for
establishing that it is a non-U.S. holder) or otherwise establishes an
exemption.
On October 7, 1997, the U.S. Treasury Department issued final Treasury
regulations governing information reporting and the certification procedures
regarding withholding and backup withholding on certain amounts paid to non-U.S.
persons after December 31, 1998. Such regulations, among other things, may
change the certification procedures relating to the receipt by intermediaries of
payments on behalf of a beneficial owner of a Note. Prospective investors should
consult their tax advisors regarding the effect, if any, of such new Treasury
regulations on an investment in the Notes.
With respect to payments made after December 31, 1998, for purposes of
applying the rules set forth in the three preceding paragraphs to an entity that
is treated as fiscally transparent (e.g., a partnership or certain trusts) for
U.S. federal income tax purposes, the beneficial owner means each of the
ultimate beneficial owners of the entity.
S-20
<PAGE> 21
UNDERWRITING
Subject to the terms and conditions set forth in an Underwriting Agreement
(the "Underwriting Agreement") between the Company and the Underwriters named
therein (the "Underwriters"), the Company has agreed to sell to the
Underwriters, and each of the Underwriters have severally agreed to purchase
from the Company, the principal amount of Notes set forth opposite its name
below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF NOTES
------------------------------------------------------------- ----------------
<S> <C>
Smith Barney Inc. ........................................... $ 35,821,050
CIBC Oppenheimer Corp. ...................................... $ 2,008,950
Dain Rauscher Incorporated................................... $ 510,000
J.C. Bradford & Co. ......................................... $ 375,000
Stifel, Nicolaus & Company................................... $ 225,000
First Albany Corporation..................................... $ 30,000
Jahney Montgomery Scott Inc. ................................ $ 30,000
-----------
Total.............................................. $ 39,000,000
===========
</TABLE>
In the Underwriting Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Notes if any are purchased.
The Notes are offered subject to receipt and acceptance by the
Underwriters, to prior sale and to the Underwriters' right to reject any order
in whole or in part and to withdraw, cancel or modify the offer without notice.
It is expected that delivery of the Notes will be made at the office of Smith
Barney, 388 Greenwich Street, New York, New York, or through the facilities of
the Depositary, on or about March 4, 1998.
The Company has been advised that the Underwriters propose to offer the
Notes to the public initially at the public offering price set forth on the
cover page of this Prospectus Supplement and to certain dealers at a price that
represents a concession not in excess of $0.30 per Note, and that the
Underwriters may allow, and each such dealer may reallow, to other dealers a
concession not exceeding $0.10 per Note. After the initial public offering, the
public offering price, the underwriting discount and such concessions may be
changed from time to time.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus Supplement (or if such 30th day is not a
business day, on the next business day thereafter), to purchase up to an
additional $5,850,000 principal amount of Notes from the Company at the same
price per Note as the initial Notes to be purchased by the Underwriters. The
Underwriters may exercise such option only for the purpose of covering
over-allotments, if any, incurred in connection with the sale of Notes offered
hereby.
The Company has been advised by the Underwriters that the Underwriters may
make a market in the Notes, subject to applicable laws and regulations. However,
the Underwriters are not obligated to do so and may discontinue any such
market-making at any time without notice. No assurance can be given that an
active public market for the Notes will develop.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
The Notes may be offered to investors outside the United States. The
Underwriters have further agreed that any offers and sales made outside the
United States will be made in compliance with any selling restrictions
applicable in the jurisdictions where such offers and sales are made.
Smith Barney is an indirect wholly-owned subsidiary of the Company.
Accordingly, the offering is being made pursuant to the provisions of Rule 2720
of the Conduct Rules of the National Association of Notes Dealers, Inc.
regarding the offering by an affiliate of the securities of its parent.
S-21
<PAGE> 22
In connection with this offering, the Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Notes. Such
transactions may include stabilization transactions effected in accordance with
Rule 104 of Regulation M under the Securities Exchange Act of 1934, as amended,
pursuant to which such persons may bid for or purchase Notes for the purposes of
stabilizing their market price. The Underwriters also may create a short
position for their respective accounts by selling more Notes in connection with
this offering than they are committed to purchase from the Company, and in such
case may purchase Notes in the open market following completion of this offering
to cover all or a portion of such short position. The Underwriters may also
cover all or a portion of such short position, up to an aggregate of $5,850,000
aggregate principal amount of Notes, by exercising the Underwriters'
over-allotment option referred to above. In addition, Smith Barney, on behalf of
the Underwriters, may impose "penalty bids" under contractual arrangements
between the Underwriters whereby it may reclaim from an Underwriter (or a dealer
participating in this offering) for the account of the Underwriters, the selling
concession with respect to Notes that are distributed in this offering but
subsequently purchased for the account of the Underwriters in the open market.
Any of the transactions described in this paragraph may result in the
maintenance of the price of the Notes at a level above that which might
otherwise prevail in the open market. None of the transactions described in this
paragraph is required, and, if any are undertaken, they may be discontinued at
any time.
The Company or one or more its subsidiaries may from time to time purchase
or acquire a position in the Notes and may, at its option, hold, resell or
retire such Notes. This Prospectus Supplement and the Prospectus may be used by
Smith Barney, Salomon Brothers Inc and/or any successor thereto (the "Salomon
Smith Barney Subsidiaries"), each an indirect wholly-owned subsidiary of the
Company, in connection with offers and sales of the Notes in market-making
transactions at negotiated prices related to prevailing market prices at the
time of sale. Any Salomon Smith Barney Subsidiary may act as principal or agent
in such transactions.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the
Company by Cleary, Gottlieb, Steen & Hamilton and by Robert H. Mundheim, Esq.,
as counsel for the Company. Mr. Mundheim, General Counsel of the Company,
beneficially owns, or has rights to acquire under Travelers Group employee
benefit plans, an aggregate of less than one percent of the common stock of
Travelers Group.
Certain legal matters relating to the Notes will be passed upon for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York. Kenneth J.
Bialkin, a partner of that firm, is a director of Travelers Group, and he and
other attorneys of that firm beneficially own an aggregate of less than one
percent of the common stock of Travelers Group. Skadden, Arps, Slate, Meagher &
Flom LLP has from time to time acted as counsel for Travelers Group and certain
of its subsidiaries and may do so in the future.
S-22
<PAGE> 23
APPENDIX A
LIST OF DOW JONES INDEX UNDERLYING STOCKS
The following table presents the listing symbol, industry group, price per
share, total number of shares outstanding and market capitalization for each of
the component stocks in the Index based on publicly available information as of
February 26, 1998(1).
<TABLE>
<CAPTION>
ISSUER OF COMPONENT PRICE PER TOTAL SHARES MARKET
STOCK(1) SYMBOL INDUSTRY SHARE OUTSTANDING(2) CAPITALIZATION(2)
- --------------------------- ------ ------------------------ --------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
General Electric Co. ...... GE Electronics $ 77.13 3,272,727 $ 252,409,072
The Coca-Cola Co. ......... KO Beverages 68.63 2,473,225 169,725,072
Exxon Corp. ............... XON Oil/Gas 62.81 2,465,911 154,890,032
Merck & Co. ............... MRK Pharmaceuticals 126.88 1,198,258 152,028,976
Procter & Gamble Co. ...... PG Household Products 83.44 1,343,922 112,139,336
Wal-Mart Stores Inc. ...... WMT Retail-Dept 47.69 2,245,907 107,101,688
International Business
Machines Corp. .......... IBM Computers and Office 105.25 972,171 102,321,000
Equipment
AT&T Corp. ................ T Util-Telecom 61.81 1,624,253 100,399,136
Johnson & Johnson.......... JNJ Pharmaceuticals 74.25 1,343,675 99,767,872
Morris (Philip) Cos. ...... MO Tobacco 41.00 2,424,393 99,400,112
Disney (Walt) Co. ......... DIS Entertainment 111.25 677,913 75,417,824
Du Pont (E.I.) DeNemours &
Co. ..................... DD Chemicals 59.81 1,131,577 67,682,448
Hewlett-Packard Co. ....... HWP Computers 64.63 1,040,113 67,217,304
Travelers Group Inc. ...... TRV Insurance 56.00 958,285 53,663,960
Chevron Corp. ............. CHV Oil/Gas 79.50 656,753 52,211,864
Boeing Co., The............ BA Aerospace/Defense 51.25 999,593 51,229,140
General Motors Corp. ...... GM Auto & Truck 68.56 745,621 51,121,640
American Express Co. ...... AXP Financial Services 89.00 464,779 41,365,332
McDonald's Corp. .......... MCD Restaurant/Food Service 52.38 688,777 36,074,696
Minnesota Mining &
Manufacturing Co. ....... MMM Manufacturing 85.25 408,668 34,838,948
Allied-Signal Inc. ........ LAD Aerospace/Defense 42.13 564,110 23,763,134
Sears Roebuck & Co. ....... S Retail-Dept 54.81 392,001 21,486,554
Eastman Kodak Co. ......... EK Manufacturing 65.63 324,901 21,321,628
Morgan (JP) & Co. ......... JPM Financial/Banking 118.13 177,645 20,984,316
United Technologies
Corp. ................... UTX Aerospace/Defense 87.50 233,977 20,472,988
Caterpillar Inc. .......... CAT Machine Construction 53.13 372,286 19,777,694
International Paper Co. ... IP Forest Products 47.38 302,290 14,320,989
Aluminum Co. of America.... AA Metals 71.81 172,471 12,385,574
Goodyear Tire & Rubber
Co. ..................... GT Tire & Rubber 68.88 156,386 10,771,086
Union Carbide Corp. ....... UK Chemicals 45.81 137,926 6,318,735
------------
TOTAL MARKET CAPITALIZATION $ 2,052,608,150
============
AVERAGE MARKET CAPITALIZATION $ 68,420,272
</TABLE>
- ---------------
(1) The inclusion of a component stock in the portfolio should not be considered
a recommendation to buy or sell such stock, and neither the Company nor any
of its affiliates make any representation to any purchaser of securities as
to the performance of the portfolio or any component stock. Beneficial
owners of the Notes will not have any right to the component stocks or any
dividends paid thereon.
(2) Shares and Market Capitalization in thousands. The Index is a price-weighted
index, which means a component stock's weight in the Index is based on its
price per share rather than the total market capitalization of the issuer.
A-1
<PAGE> 24
======================================================
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. WE HAVE
NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE DOCUMENT.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Summary Information -- Q&A............ S-2
Incorporation of Certain Documents by
Reference........................... S-5
Risk Factors Relating to the Notes.... S-6
Description of the Notes.............. S-9
The Dow Jones Index................... S-15
Certain United States Federal Income
Tax Considerations.................. S-18
Underwriting.......................... S-21
Legal Matters......................... S-22
List of Dow Jones Index Underlying
Stocks.............................. A-1
PROSPECTUS
Prospectus Summary.................... 2
The Company........................... 6
Ratio of Earnings to Fixed Charges.... 6
The Offered Securities................ 6
Description of Debt Securities........ 7
Description of Index Warrants......... 15
Limitations on Issuance of Bearer
Securities and Bearer Warrants...... 19
European Monetary Union............... 20
Use of Proceeds and Hedging........... 21
Plan of Distribution.................. 21
ERISA Matters......................... 23
Experts............................... 24
Legal Matters......................... 24
Available Information................. 25
Incorporation of Certain Documents by
Reference........................... 25
</TABLE>
======================================================
======================================================
$39,000,000
SALOMON SMITH
BARNEY HOLDINGS INC.
EQUITY LINKED NOTES
BASED UPON THE
DOW JONES
INDUSTRIAL AVERAGE(SM)
DUE SEPTEMBER 6, 2005
------------
PROSPECTUS SUPPLEMENT
FEBRUARY 26, 1998
(INCLUDING PROSPECTUS
DATED DECEMBER 1, 1997)
------------
SALOMON SMITH BARNEY
CIBC OPPENHEIMER
======================================================
