<PAGE> 1
Filed pursuant to Rule 424(b)2
Registration No. 333-38931
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION AND DECLARED EFFECTIVE. THIS
PROSPECTUS SUPPLEMENT IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 1998
[SALOMON SMITH BARNEY LOGO]
PROSPECTUS SUPPLEMENT A Member of TravelersGroup [Umbrella]
(To Prospectus Dated December 1, 1997) SAFETY FIRST(SM) INVESTMENTS
Safety of Principal, Opportunity for Growth
UNITS
SALOMON SMITH BARNEY HOLDINGS INC.
WORLD INDEX ALLOCATION SERIES 1998
PRINCIPAL-PROTECTED EQUITY LINKED NOTES
BASED UPON THE
LATIN 15(TM) INDEX
DUE , 2005
($10 PRINCIPAL AMOUNT PER UNIT)
------------------------
GENERAL:
- - Senior unsecured debt securities of Salomon Smith Barney Holdings Inc.
- - Issuable and transferable only in minimum denominations of $10 or integral
multiples thereof.
- - No payments prior to maturity.
- - Not redeemable prior to maturity.
- - Application will be made to list the Notes on the Chicago Board Options
Exchange under the symbol "LFS".
PAYMENT AT MATURITY:
- - Principal Amount ($10 per Unit) + Supplemental Redemption Amount, if any.
- - The Supplemental Redemption Amount will be based on the percentage increase,
if any, in the Latin 15(TM) Index (calculated based on an average value of the
Index during a period that is expected to be between 60 and 84 months prior to
maturity), reduced on a daily basis by an annual adjustment factor that is
expected to be between 1.25% and 1.75% per annum. The Calculation Period and
the Adjustment Factor will be determined on the Pricing Date and disclosed to
you in the final Prospectus Supplement. The annual application of the
Adjustment Factor will result in a total reduction in the adjusted value of
the Latin 15(TM) Index used to determine the Supplemental Redemption Amount at
maturity of between 8.42% and 11.63%.
- - The Supplemental Redemption Amount may be ZERO, but will not be less than
zero.
For information as to the Supplemental Redemption Amount and certain United
States federal income tax consequences to holders of the Notes, you should refer
to "Description of Notes -- Determination of the Supplemental Redemption Amount"
and "Certain United States Federal Income Tax Considerations" in this Prospectus
Supplement.
"Latin 15(TM) Index" is a service mark of the Chicago Board Options Exchange
("CBOE") and has been licensed for use in connection with the Notes. The Notes
are not sponsored, endorsed, sold or promoted by the CBOE. The CBOE does not
make any 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-7.
------------------------
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 PROSPECTUS, IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT THE COMPANY(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C>
Per Unit........................... $10.00 $ $
- ---------------------------------------------------------------------------------------------------------------------------------
Total.............................. $ $ $
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses payable by the Company estimated at $ .
------------------------
The Notes are offered by the Underwriter named herein, subject to prior sale,
when, as and if accepted by it and subject to certain conditions. It is expected
that delivery of the Notes will be made at the offices of Salomon Smith Barney
Inc., 388 Greenwich Street, New York, New York, or through the facilities of The
Depository Trust Company, on or about , 1998.
SALOMON SMITH BARNEY
, 1998
<PAGE> 2
SUMMARY INFORMATION -- Q&A
This summary includes questions and answers that highlight selected
information from the accompanying Prospectus and this Prospectus Supplement to
help you understand the Principal-Protected Equity Linked Notes (the "Notes")*
based upon the Latin 15(TM) Index, as published by the CBOE. You should
carefully read the entire Prospectus and Prospectus Supplement to fully
understand the terms of the Notes, certain information regarding how the Latin
15(TM) Index (the "Latin 15(TM) 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 unsecured senior debt securities issued by
Salomon Smith Barney Holdings Inc. (the "Company"). The Notes will rank equally
with all other unsecured and unsubordinated debt of the Company. The Notes
mature on , 2005 and do not provide for earlier redemption by you or the
Company. 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 "Unit" of Notes represents a principal amount of $10. You may transfer
the Notes only in denominations of $10 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
Latin 15(TM) Index during a specified period. At maturity, you will receive a
payment on each Note equal to the sum of two amounts: the principal amount ($10
per Unit) and the "Supplemental Redemption Amount", which is based on the
percentage increase, if any, in the Latin 15(TM) Index, calculated based on an
average of the values of the Index during a period that is expected to be
between 60 and 84 months prior to maturity and reduced by an Adjustment Factor,
as described below. You will not receive less than the principal amount.
Principal Amount
The principal amount per Unit is $10.
Supplemental Redemption Amount
The Supplemental Redemption Amount per Unit will equal:
<TABLE>
<S> <C>
Adjusted Ending Value - Starting Value
$10 X ---------------------------------------
Starting Value
</TABLE>
but will not be less than zero.
- ---------------
* Please refer to the "Index of Terms" attached as Appendix A for a listing of
defined terms (which are capitalized) and the pages on which they are defined
in this Prospectus Supplement.
S-2
<PAGE> 3
"Adjusted Ending Value" means the average of the values of the Latin 15(TM)
Index at the close of the market on the of each month in the -month
Calculation Period prior to maturity of the Notes, commencing in , as
reduced by the Adjustment Factor. If the of any such month is not an Index
Business Day, the Index value for that month will equal the closing value of the
Index on the next Index Business Day, except that if , 2005 is not an Index
Business Day, the Index value for , 2005 will equal the closing value of
the Index on the immediately preceding Index Business Day. If there is a
disruption in the trading of the American Depositary Receipts ("ADRs") or
closed-end country funds comprising the Latin 15(TM) Index, their underlying
securities or certain futures or options relating to the Latin 15(TM) Index or
such ADRs, country funds or underlying securities during a scheduled calculation
date in any such month, the Index value for that month for purposes of
calculating the Adjusted Ending Value will equal the closing value of the Index
on the next Index Business Day on which there is not a market disruption, except
that, in the case of such a disruption on , 2005, the Index value for
, 2005 will equal the closing value of the Index on the immediately
preceding Index 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.
"Adjustment Factor" equals % per annum, and will be applied to reduce
the value of the Index during the term of the Notes. We will determine the
Adjustment Factor on the date the Notes are priced for initial sale to the
public (the "Pricing Date") and disclose it to you in the final Prospectus
Supplement delivered to you in connection with sales of the Notes. The
Adjustment Factor is expected to be between 1.25% and 1.75% per annum. As a
result of its application, the adjusted value of the Index used to calculate the
Supplemental Redemption Amount at the stated maturity of the Notes is expected
to be 8.42% to 11.63% less than the actual average Index value as calculated on
each of the calculation days during the Calculation Period. For a detailed
discussion of how the Adjustment Factor will affect the value of the Index used
to calculate your Supplemental Redemption Amount (i.e., the Adjusted Ending
Value), see "Description of the Notes -- Determination of the Supplemental
Redemption Amount" and "Risk Factors Relating to the Notes -- Comparison to
Other Securities -- Effect of Adjustment Factor" in this Prospectus Supplement.
"Calculation Period" means the period from and including the date that is
expected to be 60 to 84 months prior to the maturity date to but excluding the
maturity date. We will determine the Calculation Period on the Pricing Date and
disclose it to you in the final Prospectus Supplement delivered to you in
connection with sales of the Notes.
"Starting Value" will equal the value of the Index at the market close on
the Pricing Date. We will disclose the Starting Value to you in the final
Prospectus Supplement delivered to you in connection with sales of the Notes.
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
Adjusted Ending Value is greater than the Starting Value. IF THE ADJUSTED ENDING
VALUE IS LESS THAN, OR EQUAL TO, THE STARTING 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.
S-3
<PAGE> 4
Supplemental Redemption Amount -- Examples
Here are two examples of hypothetical Supplemental Redemption Amount
calculations:
Example 1: The average of the values of the Latin 15(TM) Index over the
months prior to maturity, as adjusted, is less than the Starting
Value:
Hypothetical Starting Value: 80.84
Hypothetical Adjusted Ending Value (calculated using the Adjustment
Factor): 60.63
<TABLE>
<C> <C> <C> <S> <C>
60.63 - 80.84
Supplemental Redemption Amount (per Unit) = $10 X ------------- = $0
80.84
(Supplemental Redemption Amount
cannot be less than zero)
</TABLE>
Total payment at maturity (per Unit) = $10 + $0 = $10
Example 2: The average of the values of the Latin 15(TM) Index over the
months prior to maturity, as adjusted, is greater than the Starting
Value:
Hypothetical Starting Value: 80.84
Hypothetical Adjusted Ending Value (calculated using the Adjustment
Factor): 121.26
<TABLE>
<C> <C> <S>
121.26 - 80.84
Supplemental Redemption Amount (per Unit) = $10 X -------------- = $5
80.84
</TABLE>
Total payment at maturity (per Unit) = $10 + $5 = $15
WHAT IS THE EFFECT OF CALCULATING THE ADJUSTED ENDING VALUE ON THE BASIS OF AN
AVERAGE?
The Calculation Period for the Notes will extend for a significant portion
of the life of the Notes, and the Supplemental Redemption Amount will be
calculated based on the average values of the Index over this period. As a
result of the use of an average over the Calculation Period, rather than one
closing Index value at maturity, to calculate the Adjusted Ending Value, the
market value of the Notes and the Supplemental Redemption Amount will be less
sensitive to fluctuations in the value of the Index as the time remaining to
maturity lessens. This could result in a lower or higher payment than would be
the case if one closing Index value at maturity were used to calculate the
Adjusted Ending Value. In particular, if the Index generally increases over the
Calculation Period, then the payment on the Notes will be lower, and could be
materially lower, than would be the case if one closing Index value at maturity
were used.
WHO PUBLISHES THE LATIN 15(TM) INDEX AND WHAT DOES IT MEASURE?
The Latin 15(TM) Index is a stock index published, operated and distributed
by the CBOE that is intended to measure the composite price performance of its
constituent securities. The Latin 15(TM) Index is comprised of 12 ADRs and 3
closed-end country funds which trade on the New York Stock Exchange ("NYSE").
The ADRs, in turn, represent underlying shares of stock of companies from four
Latin American countries, which at present are Argentina, Brazil, Chile and
Mexico. Two of the country funds invest primarily in Brazilian equity securities
and the third country fund invests primarily in Argentine equity securities. The
securities underlying the ADRs and country funds comprising the Index (the
"Underlying Securities") trade on various exchanges and in various markets in
the above four countries. Appendix B contains a list of the ADRs and closed-end
country funds that currently comprise the Index. You should refer to the
sections "Risk Factors Relating to the Notes -- American Depositary Receipts"
and "Latin 15(TM) Index" in this Prospectus Supplement for more information.
Please note that an investment in the Notes does not entitle you to any
ownership or other interest in the stocks of the companies or the closed-end
country funds included in the Index.
S-4
<PAGE> 5
HOW HAS THE LATIN 15(TM) INDEX PERFORMED HISTORICALLY?
We have provided a table showing the closing value of the Latin 15(TM)
Index on the last business day of each month from June 1995 through August 1998.
You can find this table in the section "The Latin 15(TM) Index -- Historical
Data on the Latin 15 Index" in this Prospectus Supplement. We have provided this
historical information to help you evaluate the behavior of the Latin 15(TM)
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 Relating to the Notes -- Relationship of the
Notes and the Latin 15(TM) 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 % per annum (compounded semiannually).
Based upon this estimated yield, if you pay your taxes on a calendar year
basis and if you buy a Unit of Notes at original issue for $10 and hold the Unit
until maturity, you will be required to pay taxes on the following amounts of
ordinary income from the Unit each year: $ in 1998, $ in 1999, $ in
2000, $ in 2001, $ in 2002, $ in 2003, $ in 2004, and $ in
2005. However, in 2005 the amount of ordinary income that you will be required
to pay taxes on from owning a Unit of Notes may be greater or less than $ ,
depending upon the amount you receive at maturity. Also, if the sum of the
principal amount and the Supplemental Redemption Amount is less than $ , you
may have an ordinary (rather than capital) loss which you could deduct against
other income you may have in 2005. For further information, you should refer to
"Certain United States Federal Income Tax Considerations" in this Prospectus
Supplement. If you purchase the Notes at a time other than original issue or at
price other than $10, the tax consequences to you may be different.
WILL THE NOTES BE LISTED ON A STOCK EXCHANGE?
We will apply to list the Notes on the CBOE under the symbol "LFS". 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 Relating to the Notes -- Possible Illiquidity
of the Secondary Market" in this Prospectus Supplement.
WHAT IS THE ROLE OF OUR SUBSIDIARY, SALOMON SMITH BARNEY INC.?
Our subsidiary, Salomon Smith Barney Inc. ("Salomon Smith Barney"), is the
underwriter for the offering and sale of the Notes. After the initial offering,
Salomon Smith Barney and/or other affiliates of the Company intend to buy and
sell Notes to create a secondary market for holders of the Notes, and may engage
in other activities described in "Underwriting". However, neither Salomon Smith
Barney nor any of these affiliates will be obligated to engage in any market
activities, or continue them once it has started.
Salomon Smith Barney will also be our agent (the "Calculation Agent") for
purposes of calculating the Starting Value, the Adjusted Ending Value and the
Supplemental Redemption Amount and in determining whether a Market Disruption
Event (as defined below) has occurred. In particular, the Calculation Agent will
have discretion to determine that a Market Disruption Event has occurred based
on events that take place in any one of the many U.S. and international
securities exchanges on which Latin American stocks or related derivative
securities trade. Potential conflicts of interest may exist between Salomon
Smith Barney and you as a holder of the Notes. Please refer to "Risk Factors
Relating to the Notes -- Affiliation of the Company and the Calculation Agent"
in this Prospectus Supplement.
S-5
<PAGE> 6
CAN YOU TELL ME MORE ABOUT THE COMPANY?
Salomon Smith Barney Holdings Inc. is a holding company that provides
investment banking, securities and commodities trading, brokerage, asset
management and other financial services through its subsidiaries. The Company is
a subsidiary of Travelers Group Inc. ("Travelers Group"), a diversified
financial services holding company. On April 6, 1998, Travelers Group and
Citicorp announced that they entered into a definitive agreement to combine in a
merger of equals. The transaction, which is expected to be completed during the
third quarter of 1998, is subject to various regulatory approvals, including
approval by the Federal Reserve Board.
For additional information about the Company, you should refer to the
section "The Company" in the accompanying Prospectus. You should also read the
other documents the Company has filed with the Securities and Exchange
Commission (the "SEC"), which you can find by referring to the section "Where
You Can Find More Information" in the Prospectus.
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 SEC pursuant to
Section 13 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") (File No. 1-4346), are incorporated herein by reference: (i) the Annual
Report on Form 10-K for the year ended December 31, 1997, (ii) the Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1998 and June 30, 1998 and
(iii) the Current Reports on Form 8-K filed on January 9, 1998, January 26,
1998, February 2, 1998, March 3, 1998, April 17, 1998, April 20, 1998, May 13,
1998, June 8, 1998, June 10, 1998, June 17, 1998, July 17, 1998, July 20, 1998,
July 22, 1998, July 30, 1998 and September 1, 1998. You should refer to "The
Company -- Where You Can Find More Information" and "Incorporation of Certain
Documents by Reference" in the Prospectus. These documents may also be accessed
electronically by means of the SEC's home page on the world wide web on the
internet at "http://www.sec.gov."
S-6
<PAGE> 7
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 Adjusted Ending
Value exceeds the closing value of the Latin 15(TM) Index on the date of this
Prospectus Supplement (i.e., the Starting Value), the Supplemental Redemption
Amount will be ZERO. This may be true even if the value of the Latin 15(TM)
Index, as reduced by the Adjustment Factor, exceeds the Starting 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 Adjusted Ending Value Will Be Determined during the Months Prior
to Maturity. Because the Adjusted Ending Value will be based upon the closing
value of the Latin 15(TM) Index on the of each month during the
-month Calculation Period prior to maturity as adjusted by the Adjustment
Factor, 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, and a high Index value at the
close of one or more months during the Calculation Period may be substantially
offset by a low Index value at the close of one or more other months during the
Calculation Period.
In addition, the Calculation Period for the Notes will extend for a
significant portion of the life of the Notes, and the Supplemental Redemption
Amount will be calculated based on the average values of the Index over this
period. The use of an average over the Calculation Period, rather than one
closing Index value at maturity, to calculate the Adjusted Ending Value could
result in a lower or higher payment at maturity than would otherwise be the
result. In particular, if the Index generally increases over the Calculation
Period, then the payment on the Notes will be lower, and could be materially
lower, than would be the case if one closing Index value at maturity were used.
No Periodic Interest. No periodic payments of interest will be made on the
Notes or the principal amount thereof. However, the payment of a Supplemental
Redemption Amount at maturity, if that amount exceeds zero, may be deemed to be
interest.
Yield May Be Lower than the Yield on a Standard Debt Security of Comparable
Maturity. The amount we pay you at maturity may be less than the return you
could earn on other investments. Because the Adjusted Ending Value of the Latin
15(TM) Index may be less than, equal to or only slightly greater than the
Starting Value, the effective yield to maturity on the Notes (which is linked to
the amount by which the Adjusted Ending Value exceeds the Starting Value) may be
less than that which would be payable on a conventional fixed-rate, non-callable
debt security of the Company. In addition, any such return may not fully
compensate you for any opportunity cost to you when you take into account
inflation and other factors relating to the time value of money.
Return Does Not Reflect Dividends. Your return on the Notes will not
reflect the return you would realize if you actually owned the ADRs and shares
of the country funds comprising the Index (or the Underlying Securities) and
received the dividends paid on those ADRs and shares of country funds because of
the reduction caused by the Adjustment Factor and because the CBOE calculates
the Index by reference to the prices of the ADRs and shares of country funds
comprising the Index without taking into consideration the value of dividends
paid on those ADRs and shares of country funds.
Effect of Adjustment Factor. Because the actual index values of the Latin
15(TM) Index during the Calculation Period will be reduced by the Adjustment
Factor in order to determine the Adjusted Ending Value, your return on the Notes
will be less than your return on a similar indexed instrument that was directly
linked to the Latin 15(TM) Index, but was not subject to such adjustment.
S-7
<PAGE> 8
AMERICAN DEPOSITARY RECEIPTS
Twelve of the securities comprising the Index will be in the form of ADRs.
An ADR is a negotiable receipt which is issued by a depositary, generally a
bank, representing underlying shares of a foreign issuer (a "Foreign Issuer")
that have been deposited and are held, on behalf of the holders of the ADRs, at
a custodian bank in the Foreign Issuer's home country. While the market for
underlying shares will generally be in the country in which the Foreign Issuer
is organized and while trading in such market will generally be based on that
country's currency, ADRs trade in U.S. dollars.
Although ADRs are distinct securities from their underlying shares, the
trading characteristics and valuations of ADRs will usually mirror the
characteristics and valuations of the underlying shares represented by the ADRs.
Active trading volume and efficient pricing in the principal market in the home
country for the underlying shares will usually, but not necessarily, indicate
similar characteristics in respect of the ADRs. Because of the size of an
offering of underlying shares in ADR form outside the home country and/or other
factors that have limited or increased the float of certain ADRs, the liquidity
of such securities may be less than or greater than that with respect to the
underlying shares. In addition, the terms and conditions of depositary
facilities may result in less liquidity or lower market values for the ADRs than
for their underlying shares. Since holders of ADRs may surrender the ADR in
order to take delivery of and trade the underlying shares, a characteristic that
allows investors in ADRs to take advantage of price differentials between
different markets, a market for the underlying shares that is not liquid will
generally result in an illiquid market for the ADR representing such underlying
shares.
CURRENCY EXCHANGE RATES
The prices of the ADRs and country funds are quoted in U.S. dollars. Thus
the Index will always be expressed in U.S. dollars and any Supplemental
Redemption Amount relating to the Notes will be paid in U.S. dollars. However,
investors should be aware that a depreciation of the value of the currencies in
the countries in which the Underlying Securities are primarily traded versus the
U.S. dollar may adversely affect the value of the Index (and thus the trading
value of the Notes).
RELATIONSHIP OF THE NOTES AND THE LATIN 15(TM) INDEX
The historical Latin 15(TM) 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 ADRs and country funds comprising the Index will
determine the value of the Latin 15(TM) Index, it is impossible to predict
whether the value of the Index will fall or rise. Trading prices of the ADRs and
country funds comprising the Latin 15(TM) 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 ADRs and country funds as well as the Underlying Securities are traded, and
by various circumstances that can influence the values of stocks in a specific
market segment or a particular underlying stock. You should refer to "-- Risk
Factors Relating to Foreign Jurisdictions" below.
The policies of the CBOE concerning additions, deletions and substitutions
of the ADRs and country funds comprising the Latin 15(TM) Index and the manner
in which the CBOE takes account of certain changes affecting such ADRs and
country funds may affect the value of the Index. The policies of the CBOE with
respect to the calculation of the Index could also affect the value of the
Index. The CBOE may discontinue or suspend calculation or dissemination of the
Latin 15(TM) Index or materially alter the methodology by which it calculates
the Index. Any such actions could affect the value of the Notes. You should
refer to "The Latin 15(TM) Index" below.
POSSIBLE ILLIQUIDITY OF SECONDARY MARKET
We will apply to list the Notes on the CBOE. 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 few
buyers when you
S-8
<PAGE> 9
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.
FACTORS AFFECTING TRADING VALUE OF THE NOTES
We believe that the value of the Notes in the secondary market 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 price
at which you will be able to sell the Notes prior to maturity may be at a
discount, which could be substantial, from the principal amount thereof, if, at
such time, the value of the Index is less than, equal to, or not sufficiently
above the Starting Value. The following paragraphs describe what we expect to be
the impact on the market value of the Notes of a change in a specific factor,
assuming all other conditions remain constant.
Index Value. We expect that the market value of the Notes will likely
depend substantially on the amount, if any, by which the current Index value, as
reduced by the Adjustment Factor, exceeds the Starting Value. If you choose to
sell your Notes when the value of the Index exceeds the Starting Value, you may
receive substantially less than the amount that would be payable at maturity
based on that Index value because of expectations that the Index will continue
to fluctuate until the Adjusted Ending Value is determined. If you choose to
sell your Notes when the value of the Index is below the Starting Value, you can
expect to receive less than the $10 principal amount per Unit of Notes. In
general, rising Latin American dividend rates (i.e., dividends per share) may
increase the value of the Index, while falling Latin American dividend rates may
decrease the value of the Index. Political, economic and other developments that
affect the Underlying Securities may also affect the value of the Index and the
value of the Notes. The effect of the current Index value on the market value of
the Notes will likely decrease significantly over time during the -month
Calculation Period because a portion of the Adjusted Ending Value will be
determined on each of the Calculation Days during such period.
United States 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. Interest rates may also affect the U.S. economy and, in turn, the
value of the Index, which (for the reasons discussed above) would affect the
value of the Notes. Rising U.S. interest rates may lower the value of the Index
and, thus, the Notes. Falling U.S. interest rates may increase the value of the
Index and, thus, the Notes.
Latin American Interest Rates. Interest rates in the Latin American
countries represented in the Index may affect the economies of those countries
and, in turn, the value of the Index, which (for the reasons discussed above)
would affect the value of the Notes. In general, rising interest rates in such
Latin American countries may lower the value of the Index and the Notes. Falling
interest rates in such Latin American countries may increase the value of the
Index and the Notes. In general, and assuming that all other relevant factors
are held constant we expect that the effect of any change in Latin American
interest rates on the trading value of the Notes will not be as great as the
effect of an equivalent change in U.S. interest rates.
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 number of ADRs and closed-end country funds, 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 market value of the Notes is likely
to decrease over time during the Calculation Period because a portion of the
Adjusted Ending Value will be determined on the of each month during such
-month period.
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. Any
such difference will reflect a "time premium" resulting from expectations
concerning the value of the Index during the -month Calculation Period
prior to the maturity of the Notes. However, as the time remaining to the
maturity of the Notes decreases, particularly
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<PAGE> 10
during the -month Calculation Period, this time premium may decrease,
adversely affecting the trading value of the Notes.
Dividend Yields. If dividend yields increase on the Underlying Securities,
we expect that the value of the Notes may be adversely affected, since the Index
does not incorporate the value of such payments. Conversely, if dividend yields
decrease on the Underlying Securities, the value of the Notes may be favorably
affected.
Company Credit Ratings, Financial Condition and Results. Actual 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.
General economic conditions and the earnings results of companies whose
securities are represented in the Index and real or anticipated changes in such
conditions or results may affect the value of the Index and 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.
RISK FACTORS RELATING TO FOREIGN JURISDICTIONS
Investment in securities indexed to the value of Latin American equity
securities involve a high degree of risk, including (but not limited to) risks
generally applicable to Latin American companies, risks arising from the
fluctuations in the prices of the Underlying Securities, risks relating to each
Underlying Exchange (such as market disruption, suspensions and trading halts)
and risks relating to the Index. Prices of securities, including the Underlying
Securities, issued by Latin American companies are subject to political,
economic, financial, exchange rate and social factors that apply in the relevant
issuer's country as well as in other countries in which such issuer does
business (or in which its principal trading partners do business).
Certain of the exchanges on which the Underlying Securities trade may have
adopted certain measures intended to limit short-term price fluctuations. These
may include daily price floors and ceilings intended to prevent extreme
fluctuations in individual stock prices. Investors should also be aware that
certain of the exchanges in the Underlying Jurisdictions may suspend the trading
of individual stocks in certain limited and extraordinary circumstances. As a
result, variations in the Index may be limited by price limitations on, or
suspensions of trading of, individual Underlying Securities, which may, in turn,
adversely affect the value of the Notes or result in the occurrence of a Market
Disruption Event.
As compared to United States securities markets, Latin American securities
markets may be affected by different factors and developments or in different
ways based on comparable factors and developments. Prices of the Underlying
Securities are subject to political, economic, financial, exchange rate and
social factors that apply in each relevant issuer's country as well as in other
constituent countries in which such issuer does business (or in which its
principal trading partners do business). Stock and currency market volatility
and market developments in one or more countries may cause volatility or a
decline in other countries. In addition, Latin American stock markets are
relatively small and illiquid compared to major world markets.
Many Latin American markets, including the four countries in which the
Underlying Exchanges are located, have been extremely volatile, and some have
declined significantly in value during recent months. A decline in any one Latin
American market may cause a similar decline in one or more other Latin American
markets. The Latin American markets may also suffer adverse effects due to
conditions in other emerging markets, including Asian markets such as Thailand
and Indonesia. Additionally, the Latin American markets are subject to risk due
to the continuing recession in Japan and recent events in Russia. Individual
companies in each of the constituent countries underlying the Index,
particularly those with significant indebtedness or
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<PAGE> 11
costs denominated in U.S. dollars or other foreign currencies, may have
financial difficulties and may be unable or unwilling to meet their financial
obligations. There can be no assurances that the stocks traded on the Underlying
Exchanges in general, or that the value of the Underlying Securities in
particular, will not decline, thereby reducing the value of the Component
Securities, the Index and the Notes purchased by investors.
Set forth below is a discussion of certain economic, financial, exchange
rate, political and social considerations relating to each underlying
jurisdiction and the Underlying Exchanges in that underlying jurisdiction.
Investors should be aware that prices for any particular Underlying Security may
or may not move in tandem with the level of the relevant Underlying Exchange.
The approximate percentage of the Index as set forth beside the name of each
underlying jurisdiction is as of September 9, 1998.
BRAZIL (33%)
There are a number of risks common to all companies which engage in
business in Brazil. These include historically high inflation, political and
constitutional uncertainty and possible government intervention in business
transactions, including through currency and credit policies that restrict
economic activity.
Brazilian stocks have experienced a significant decline since July 1, 1997
(approximately 63% as of September 10, 1998, as measured by the BOVESPA Index)
and there can be no assurances that Brazilian stocks will not decline further or
continue to be volatile. Brazil's currency, the real, has experienced a
significant decline in value relative to the U.S. dollar since July 1, 1997
(approximately 9% as of September 10, 1998), and no prediction can be made as to
the future value or volatility of the Brazilian real against the U.S. dollar.
The combination of a decline in the Brazilian real and the Brazilian securities
markets has created an unstable economic situation at the date hereof.
The Brazilian political environment was marked by high levels of
uncertainty after the country returned to civilian rule in 1985, ending 20 years
of military government. Elections will be held in October 1998 in which the
President, Vice-President, state Governors and the members of the Chamber of
Deputies, as well as one-third of the members of the Senate, will be elected.
The outcome of these elections could have a strong impact on whether the
economic reforms of the present are continued. There can be no assurance that
President Cardoso will be reelected and, more generally, that the political
consensus in favor of the economic reform program pursued by the present
administration can or will be sustained following the elections.
The Brazilian Government implemented several measures intended to curtail
the outflow of foreign investment when Central Bank reserves were reduced from
U.S.$61.2 billion in September 1997 to U.S.$52.9 billion by the end of October
1997. On October 30, 1997, the Central Bank raised the benchmark interest rate
from 20.7% to 43.4%, in order to retain investment funds in the country. On
November 10, 1997, the Brazilian Government presented a series of fiscal
measures aimed at reducing the budget deficit and bolstering economic
conditions. Measures included certain tax increases, eliminations of budget
expenses and reductions in available fiscal incentives. These fiscal measures
have been substantially implemented. Constitutional reforms affecting civil
servants and social security have also been accelerated and may result in lower
Government deficits. However, there can be no assurance that such measures will
be successful in protecting the Brazilian Government's present currency exchange
rate policy and price stability program.
Additionally, the decrease in economic activity caused by the increase in
interest rates and the fiscal measures may have substantial negative effects on
companies doing business in Brazil. Projected GDP growth for Brazil for 1998 has
been reduced from approximately 4% to approximately 1%. It is also expected that
these events and measures may have the effect of reducing the purchasing power
of Brazilian consumers in general.
Brazil's trade deficit for 1997 increased to U.S.$8.37 billion compared to
U.S.$5.54 billion for 1996. A continuing increase in the trade deficit would
substantially reduce Brazil's foreign currency reserves and could negatively
affect Brazil's economic development as a whole.
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<PAGE> 12
MEXICO (30%)
The Mexican economy had certain weaknesses that made it unable to withstand
the severe internal and external political and economic shocks that occurred in
1994, resulting in the destabilization of the Mexican economy, a sharp and rapid
devaluation of the Mexican peso, a significant loss of international reserves, a
crisis of confidence on the part of foreign portfolio investors and an economic
and financial crisis facing the government.
Though the Mexican economy has recently shown signs of recovery, it still
faces significant hurdles. In the short-term, inflation and interest rates
higher than those experienced in the 1990-1994 period are expected. In addition,
in the medium-term, significant new investment in infrastructure, industrial and
agricultural modernization, training and environmental protection will be
required for continued growth and development. The Mexican economy is likely to
continue to be subject to the effects of adverse domestic and external factors
such as declines in foreign direct and portfolio investment and high interest
rates, which may lead to volatility in the foreign exchange and financial
markets and which may adversely affect the Underlying Securities of Mexican
companies.
Mexican stocks have experienced a significant decline since July 1, 1997
(approximately 37% as of September 10, 1998, as measured by the I.P.C. All-Share
Index) and there can be no assurances that Mexican stocks will not decline
further or continue to be volatile. The Mexican peso has experienced a
significant decline in value relative to the U.S. dollar since July 1, 1997
(approximately 26% as of September 10, 1998), and no prediction can be made as
to the future value or volatility of the Mexican peso against the U.S. dollar.
The combination of a decline in the Mexican peso and the Mexican securities
markets has created an unstable economic situation at the date hereof.
Mexico's current account deficit for 1997 increased to U.S.$7.45 billion
compared to U.S.$2.33 billion for 1996. A continuing increase in the current
account deficit could reduce Mexico's foreign currency reserves and could
negatively affect Mexico's economic development as a whole.
ARGENTINA (17.5%)
For several decades, Argentina experienced periods of high inflation, slow
or negative growth, declining investment rates, significant devaluations of the
Argentine currency and impositions of exchange controls. In March 1991, the
Argentine Government introduced a tax reform and expenditure reduction program
aimed at reducing inflation and restructuring the economy (the "Convertibility
Plan") and adopted a currency conversion law (the "Convertibility Law")
requiring the Argentine Central Bank to (i) sell U.S. dollars at a rate of one
Argentine peso per U.S. dollar and (ii) back the monetary base with
international reserves consisting of gold, cash, foreign exchange deposits
abroad, foreign securities, and certain public bonds denominated in foreign
currency (such bonds not to exceed one-third of such reserve). During the first
half of 1995, Argentina experienced a banking and credit crisis which has been
attributed to (i) the devaluation of the Mexican peso in December 1994, which
undermined the confidence of local and foreign investors in the Convertibility
Plan and (ii) uncertainty regarding the presidential elections in May 1995 in
which President Carlos Saul Menem was ultimately reelected. These factors led to
large capital outflows, a substantial decline in both the international reserves
and monetary liabilities of the Central Bank between the end of December 1994
and the end of March 1995, a significant tightening of bank liquidity, a surge
in interest rates and a sharp fall in asset prices. During 1995, industrial
production decreased sharply, real GDP experienced a 4.6% decline and
unemployment peaked at 18.4% nationally in May.
In response to this crisis, the Argentine Government: sought further
funding from the International Monetary Fund ("IMF"), agreeing to observe
balanced budget policies; required the Central Bank to convert U.S. dollars into
Argentine pesos at par and vice versa; relaxed bank reserve requirements;
created a private deposit insurance program and implemented other measures
designed to improve the liquidity of the banking system; and announced fiscal
and other measures to counter tax evasion, increase revenues and reduce
unemployment. On February 4, 1998, the IMF approved a three-year extended
facility for Argentina in the amount of U.S.$2.8 billion. Among other targets,
the accord between the IMF and Argentina requires that Argentina not exceed a
public deficit (the overall balance excluding revenues from privatizations) of
U.S.$3.5
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<PAGE> 13
billion for 1998. In addition, the Argentine Government has committed itself to
limiting the trade deficit of Argentina to no more than U.S.$5.0 billion in
1998. If in any month in 1998 the cumulative 12-month merchandise trade deficit
exceeds U.S.$5.0 billion, the Government, in consultation with the IMF, will
take appropriate corrective fiscal and/or credit policy measures. During January
1998, Argentina recorded a trade deficit of U.S.$0.9 billion, raising the
cumulative 12-month merchandise trade deficit to approximately U.S.$5.4 billion.
As a result, the Government must consult with the IMF in order to decide what
corrective measures should be taken. In addition to the 1998 budget deficit
target, the IMF requires certain reforms of Argentina's labor and tax laws and
the completion of certain scheduled privatizations.
Argentine stocks have experienced a significant decline since July 1, 1997
(approximately 63% as of September 10, 1998, as measured by the Merval Index)
and there can be no assurances that Argentine stocks will not decline further or
continue to be volatile.
The Argentine Central Bank's future capacity to back the Argentine peso
depends upon various factors, including completion of structural reforms, the
Argentine Government's ability to achieve and maintain a fiscal surplus over the
years, continuation of low levels of inflation, sustained economic growth and
the success of the privatization process. Furthermore, there can be no assurance
that the Convertibility Law will not be amended or rescinded or that Argentine
monetary authorities will not change their current policy of supporting the
exchange rate of the Argentine peso against the U.S. dollar, particularly if
other countries within the region (principally Brazil) allow their currencies to
depreciate vis-a-vis the Argentine peso. Fluctuations in the exchange rate
between the Argentine peso and the U.S. dollar could adversely affect the value
of the Argentine Component Securities.
CHILE (18%)
Chilean stocks have experienced a significant decline since July 1, 1997
(approximately 53% as of September 10, 1998, as measured by the Santiago IPSA
Index) and there can be no assurances that Chilean stocks will not decline
further or continue to be volatile. The Chilean peso has experienced a
significant decline in value relative to the U.S. dollar since July 1, 1997
(approximately 12% as of September 10, 1998), and no prediction can be made as
to the future value or volatility of the Chilean peso against the U.S. dollar.
The combination of a decline in the Chilean peso and the Chilean securities
markets has created an unstable economic situation at the date hereof.
The Chilean peso has been subject to large nominal devaluations in the past
and may be subject to significant fluctuations in the future. The Chilean
government's economic policies affecting foreign exchange and future
fluctuations in the value of the Chilean peso against the U.S. dollar could
adversely affect the Chilean Component Securities, which could have an adverse
impact on the performance of the Index. Although the Chilean government's policy
has shifted in the last 20 years from a high level of management of the economy
to a more market-oriented approach, it historically has exercised and continues
to exercise substantial influence over many aspects of the private sector.
Accordingly, Chilean government actions in the future could have a significant
effect on economic conditions, which could affect market conditions and prices
and yields of Chilean securities, including the Chilean Underlying Securities.
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 Adjusted Ending Value and the
Supplemental Redemption Amount or whether a Market Disruption Event has
occurred. In particular, the Calculation Agent will have the discretion to
determine that a Market Disruption Event has occurred based on events that the
take place on any one of the many U.S. and international securities exchanges on
which Latin American stocks and related derivative securities trade. You should
refer to "Description of the Notes -- Market Disruption Events",
"-- Discontinuance of the Latin 15(TM) Index" and "-- Alteration of Method of
Calculation" below. Salomon 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
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<PAGE> 14
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. Salomon
Smith Barney is obligated to carry out its duties and functions as Calculation
Agent in good faith and using its reasonable judgment. Salomon Smith Barney may
also engage in certain activities in connection with hedging the Company's
obligation under the Notes. You should refer to "Use of Proceeds and Hedging" in
the accompanying Prospectus.
PURCHASES AND SALES BY AFFILIATES OF THE COMPANY
The Company, Salomon Smith Barney and other affiliates of the Company may
from time to time buy or sell the ADRs or country funds comprising the Index or
the Underlying Securities, or derivative instruments related to the Index, the
ADRs, the country funds or the Underlying Securities, 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 or 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
their 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 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). You should refer to "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 a
Supplemental Redemption Amount, if any, calculated as though the maturity date
of the Notes were the date of the commencement of the proceeding.
------------------------
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.
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<PAGE> 15
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the accompanying 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 Principal-Protected Equity Linked Notes based upon the Latin 15(TM)
Index (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 $ ( Units). The Notes
will mature on , 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 $10 (one Unit) 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 amended 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 SEC 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.
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, determined as provided below. If the
Adjusted Ending Value does not exceed the Starting Value, the holder of a Note
will be entitled to receive only the principal amount thereof. The principal
amount will equal $10 per Unit of Notes.
DETERMINATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
The Supplemental Redemption Amount for each Unit of Notes ($10 principal
amount) will be determined by the Calculation Agent and will equal:
<TABLE>
<S> <C>
Adjusted Ending Value - Starting Value
$10 X ------------------------------------------------
Starting Value
</TABLE>
provided, however, 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.
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<PAGE> 16
The "Adjusted Ending Value" will be determined by the Calculation Agent and
will equal the average (arithmetic mean) of the closing values of the Index on
each of the Calculation Days during the Calculation Period, multiplied by
the Adjustment Factor. If the of any month during the Calculation Period is
not a Calculation Day because it is not an Index 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 Index
determined on the next Index Business Day on which no Market Disruption Event
exists, except that if , 2005 is not a Calculation Day for any reason, then
the Index value for , 2005 will equal the closing value of the Latin 15(TM)
Index determined on the immediately preceding Index Business Day on which no
Market Disruption Event exists.
The "Adjustment Factor" will equal % per annum, and will be applied to
reduce the value of the Index during the term of the Notes. We will determine
the Adjustment Factor on the Pricing Date and disclose it to you in the final
Prospectus Supplement delivered to you in connection with sales of the Notes.
The Adjustment Factor is expected to be between 1.25% and 1.75% per annum. As a
result of its application, the Adjusted Ending Value used to calculate the
Supplemental Redemption Amount at the stated maturity of the Notes is expected
to be 8.42% to 11.63% less than the actual average of the Index values on the
Calculation Days during the Calculation Period. If the Adjusted Ending Value is
calculated with respect to a date earlier than the stated maturity of the Notes,
the Adjustment Factor will be reduced pro rata to reflect the number of days
elapsed between the Pricing Date and such date.
The "Starting Value" will equal the closing value of the Index on the
Pricing Date. We will determine the Starting Value on the Pricing Date and
disclose it to you in the final Prospectus Supplement delivered to you in
connection with sales of the Notes.
The "Calculation Period" means the period from and including the date that
is expected to be between 60 and 84 months prior to the maturity date to but
excluding the maturity date. We will determine the Calculation Period on the
Pricing Date and disclose it to you in the final Prospectus Supplement delivered
to you in connection with sales of the Notes. A "Calculation Day" means the
of each month during the Calculation Period, provided that such
day is an Index Business Day and no Market Disruption Event has occurred on such
day.
For purposes of determining the Adjusted Ending Value, an "Index Business
Day" is a day on which the NYSE, the CBOE and the Underlying Exchanges are open
for trading and the Index or any Successor Index, as defined below, is
calculated and published. The Calculation Agent may, in its discretion, add to
(or delete from) the definition of Index Business Day any other major U.S. or
international exchange which commences to serve (or ceases to serve) as the
primary exchange upon which a Component Security or Underlying Security trades
or as an exchange upon which a futures contract, an option on a futures contract
or an option contract relating to the Index trades. All determinations made by
the Calculation Agent shall be at the sole discretion of the Calculation Agent
and shall be conclusive for all purposes and binding on the Company and
beneficial owners of the Notes, absent manifest error.
HYPOTHETICAL RETURNS
The following table illustrates, for a range of hypothetical average values
of the Index during the - month Calculation Period and based upon a
hypothetical Starting Value of 80.84 and a seven-year maturity for the Notes,
(i) the hypothetical Adjusted Ending Value used to calculate the Supplemental
Redemption Amount; (ii) the percentage change from the hypothetical Starting
Value to the hypothetical Adjusted Ending Value; (iii) the hypothetical total
amount payable per Note; (iv) the hypothetical total rate of return on the
Notes; (v) the hypothetical pretax annualized rate of return on the Notes; and
(vi) the hypothetical pretax annualized rate of return of the ADRs and country
funds comprising the Index (which includes an assumed aggregate dividend yield
of 3.27% per annum, as more fully described below). The calculations in this
table assume an Adjustment Factor of 1.50% per annum (or 10.0391% over the term
of the Notes), the midpoint of the expected range of 1.25% to 1.75%.
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<TABLE>
<CAPTION>
HYPOTHETICAL PERCENTAGE CHANGE TOTAL AMOUNT
AVERAGE INDEX HYPOTHETICAL OF ADJUSTED ENDING PAYABLE AT MATURITY TOTAL RATE OF
VALUE DURING THE ADJUSTED VALUE OVER THE PER $10 PRINCIPAL RETURN ON
CALCULATION PERIOD(1) ENDING VALUE(2) STARTING VALUE AMOUNT OF NOTES THE NOTES
- --------------------- --------------- ------------------ ------------------- -------------
<S> <C> <C> <C> <C>
68.71 61.82 -23.53% $10.00 0.00%
72.76 65.45 -19.04% $10.00 0.00%
76.80 69.09 -14.54% $10.00 0.00%
80.84(5) 72.72 -10.04% $10.00 0.00%
84.88 76.36 -5.54% $10.00 0.00%
88.92 80.00 -1.04% $10.00 0.00%
92.97 83.63 3.45% $10.35 3.45%
97.01 87.27 7.95% $10.80 7.95%
101.05 90.91 12.45% $11.25 12.45%
105.09 94.54 16.95% $11.69 16.95%
109.13 98.18 21.45% $12.14 21.45%
113.18 101.81 25.95% $12.59 25.95%
117.22 105.45 30.44% $13.04 30.44%
121.26 109.09 34.94% $13.49 34.94%
125.30 112.72 39.44% $13.94 39.44%
129.34 116.36 43.94% $14.39 43.94%
133.39 120.00 48.44% $14.84 48.44%
137.43 123.63 52.93% $15.29 52.93%
141.47 127.27 57.43% $15.74 57.43%
<CAPTION>
PRETAX PRETAX ANNUALIZED
ANNUALIZED RATE RATE OF RETURN ON
OF RETURN ON STOCKS UNDERLYING
THE NOTES(3) THE INDEX(3)(4)
- --------------- -----------------
<C> <C>
0.00% 0.96%
0.00% 1.77%
0.00% 2.54%
0.00% 3.28%
0.00% 3.98%
0.00% 4.66%
0.49% 5.31%
1.10% 5.93%
1.68% 6.53%
2.25% 7.11%
2.79% 7.67%
3.32% 8.21%
3.83% 8.74%
4.32% 9.25%
4.80% 9.74%
5.27% 10.22%
5.72% 10.69%
6.16% 11.14%
6.58% 11.59%
</TABLE>
- ---------------
(1) The actual average Index value, for purposes of calculating the Supplemental
Redemption Amount at stated maturity, will be equal to the average of the
Index values on each of the Calculation Days during the -month
Calculation Period. The Calculation Period is expected to be between 60 and
84 months prior to maturity.
(2) The actual Adjusted Ending Value, for purposes of calculating the
Supplemental Redemption Amount at stated maturity, will be equal to the
actual average Index value reduced by the Adjustment Factor.
(3) These annualized rates of return are calculated on a semi-annual
bond-equivalent basis.
(4) This rate of return assumes: (i) an investment of a fixed amount in the
stocks underlying the Index with the allocation of such amounts reflecting
the relative weights of such stocks in the Index; (ii) a constant dividend
yield of 3.27% per annum, paid quarterly from the date of initial delivery
of Notes, applied to the value of the Index at the end of each such quarter
assuming such value increases or decreases linearly from the Starting Value
to the hypothetical Index value during the Calculation Period; (iii) no
transaction fees or expenses; (iv) a seven-year maturity of the Notes from
date of issue; and (v) a final Index value equal to the hypothetical average
Index value during the Calculation Period.
(5) The Hypothetical Starting Value. For purposes of this illustration, the
Starting Value is assumed to be the Index value on September 10, 1998. The
actual Starting Value will equal the closing value of the Index on the
Pricing Date, and will be disclosed in the final Prospectus Supplement
delivered to you in connection with sales of the Notes.
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 Starting
Value, the actual Adjusted Ending Value and the actual Adjustment Factor
determined by the Calculation Agent as provided herein. In particular, the
actual Adjusted Ending Value could be lower or higher than those reflected in
the table. Historical data regarding the Index is included in this Prospectus
Supplement under "The Index -- Historical Data on the Index".
S-17
<PAGE> 18
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 Component Securities which then comprise the Index or any Successor
Index (or their Underlying Securities), in each case, for more than two
hours of trading or during the one-half hour period preceding the close of
trading on the primary exchange on which each such Component Security (or
Underlying Security) is traded.
(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) on any major U.S.
or international exchange in futures contracts, options on futures
contracts or options contracts related to the Index, any Successor Index,
any Component Securities, any Underlying Securities or any Underlying
Exchanges.
(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 Component Securities which then comprise the Index or any Successor
Index or in respect of futures contracts, options on such futures contracts
or options contracts traded on any major U.S. or international exchange
related to the Index, any Successor Index, any Component Securities, any
Underlying Securities or any Underlying Exchanges.
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 or any Successor 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 Market
Disruption Event, 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 or any
applicable rule or regulation enacted or promulgated by the NYSE, any other
self-regulatory organization or the SEC of a similar scope or as a replacement
for Rule 80A, as determined by the Calculation Agent) 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 Salomon Smith Barney as Calculation Agent in
determining the existence of Market Disruption Events could conflict with the
interests of Salomon 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. 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 LATIN 15(TM) INDEX
If the CBOE discontinues publication of the Latin 15(TM) Index and the CBOE
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
Adjusted Ending Value shall be determined by reference to the value of such
Successor Index using the methodology described above under "-- Determination of
the Supplemental Redemption Amount".
S-18
<PAGE> 19
Upon any selection by the Calculation Agent of a Successor Index, the
Company shall cause notice thereof to be furnished to the Company and the
Trustee, who shall provide notice thereof to the holders of the Notes.
If the CBOE discontinues 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 the CBOE 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 Index Business Day until the earlier to occur of (a) the
determination of the Adjusted Ending 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 Wall Street Journal (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 Index as described above, such Successor Index or
value shall be substituted for the Index for all purposes, including for
purposes of determining whether an Index Business Day occurs or a Market
Disruption Event exists. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Index may adversely affect the value of
the Notes.
ALTERATION OF METHOD OF CALCULATION
If at any time the method of calculating the 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
Adjusted Ending 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 (as defined in the accompanying Prospectus)
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
maturity date of the Notes were the date of early repayment. 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 maturity date of the
Notes were the date of the commencement of the proceeding.
S-19
<PAGE> 20
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 beneficial owners
thereof, at the rate of % per annum 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 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 Exchange Act. The Depositary holds
securities that its participants ("Participants") deposit with the Depositary.
The Depositary also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations ("Direct Participants").
The Depositary is owned by a number of its Direct Participants and by the NYSE,
The American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the Depositary system is also available to others, such
as securities brokers and dealers, banks and trust companies that clear
transactions through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly. The rules applicable to the
Depositary and its Participants are on file with the Commission.
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
Underwriter and the Trustee that it intends to follow such procedures.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriter 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 Salomon 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 Adjusted Ending Value and the
Supplemental Redemption Amount or whether a Market Disruption Event has
occurred. See "-- Market Disruption Events", "-- Discontinuance of the Latin
15(TM) Index" and "-- Alteration of Method of Calculation" above.
Salomon Smith Barney is obligated to carry out its duties and functions as
Calculation Agent in good faith and using its reasonable judgment.
S-20
<PAGE> 21
THE LATIN 15(TM) INDEX
GENERAL
Unless otherwise stated, all information herein and elsewhere in this
Prospectus Supplement regarding the Index and the CBOE is derived from the CBOE
or from publicly available sources. Such information reflects the policies of
the CBOE as provided by such sources and such policies are subject to change by
the CBOE. Neither the Company nor the Underwriter take any responsibility for
the accuracy or completeness of such information.
The Latin 15(TM) Index was designed and will be maintained by the CBOE in
its sole discretion. The Index is currently comprised of 15 component
securities, including 12 ADRs representing underlying stocks and three
closed-end country funds (each ADR and closed-end country fund, a "Component
Security"), chosen by the CBOE from four Latin American countries, which as of
the date hereof are: Argentina, Brazil, Chile and Mexico. Each Component
Security is currently listed and traded on the NYSE. As of the date hereof, the
NYSE is the "Primary Market" for such Component Securities, and NYSE prices are
used to determine the value of the Index (see below). There can be no assurance,
however, that each of the Component Securities will retain its NYSE listing, nor
that the securities comprising the Index will all be listed on the NYSE as their
Primary Market. The equity securities underlying each Component Security of the
Index are traded on an Underlying Exchange. A list of the securities comprising
the Index as of the date hereof is attached as Exhibit B.
"Underlying Exchange" means certain stock exchanges or trading facilities
in the countries included in the Index in which Underlying Securities are listed
and traded from time to time as determined by the CBOE. As of the date hereof,
the Underlying Exchanges with respect to the ADRs are: for Argentina, the Bolsa
de Comercio de Buenos Aires; for Brazil, the Bolsa de Valores de Sao Paulo; for
Chile, the Bolsa de Comercio de Santiago; and for Mexico, the Bolsa Mexicana de
Valores.
The Component Securities comprising the Index ranged in capitalization from
$19.6 million to $10.7 billion as of September 2, 1998. The total capitalization
as of that date was $32.8 billion; the mean capitalization was $2.2 billion; and
the median capitalization was $1.1 billion. The largest component accounted for
11.92% of the total weighting of the Index, while the smallest accounted for
3.54%.
THE INDEX DOES NOT REFLECT THE PAYMENT OF DIVIDENDS ON THE STOCKS
UNDERLYING IT AND THEREFORE THE RETURN BASED ON THE SUPPLEMENTAL REDEMPTION
AMOUNT WILL NOT PRODUCE THE SAME RETURN YOU WOULD RECEIVE IF YOU WERE TO
PURCHASE SUCH UNDERLYING STOCKS AND HOLD THEM FOR A PERIOD EQUAL TO THE MATURITY
OF THE NOTES.
COMPUTATION AND DISSEMINATION OF THE INDEX
While the CBOE currently employs the following methodology to calculate the
Index, no assurance can be given that the CBOE will not modify or change such
methodology in a manner that may affect the Supplemental Redemption Amount, if
any, payable to beneficial owners of Notes upon maturity or otherwise.
The Index value is calculated by the CBOE or its designee on a real-time
basis using last-sale prices for each Component Security obtained from its
Primary Market. The Index value is disseminated every 15 seconds by the CBOE. If
a Component Security is not currently being traded on its Primary Market, the
most recent price at which the Component Security traded on such market will be
used in the Index value calculation.
The Index is calculated on a "modified equal-dollar-weighted" basis,
meaning that each of the Component Securities from each of the four countries is
represented in approximately equal U.S. dollar amounts in relation to other
Component Securities. At the beginning of each quarter the countries are then
reweighted in order to achieve the following percentage weightings:
Argentina -- 17.5%, Brazil -- 35%, Chile -- 17.5%, and Mexico -- 30%. The
"modified" description refers to the fact that the U.S. dollar-weighting is done
on a country by country basis and not between Primary Securities of different
countries.
S-21
<PAGE> 22
The value of the Index equals the current market value (based on U.S.
primary market prices) of the assigned number of shares of the Component
Securities divided by the current Index divisor. The Index divisor was initially
calculated to yield a benchmark value of 150.00 at the close of trading on
January 3, 1994. The value of the Index at the close of trading September 10,
1998 was 80.84.
INDEX MAINTENANCE AND REBALANCING
The Index is maintained by the CBOE in its sole discretion. To maintain
continuity in the Index following an adjustment to an Primary Security the CBOE
may adjust the Index divisor. Changes which may result in divisor changes
include, but are not limited to, certain rights issuances, quarterly
re-balancing, and Component Security changes.
The Index is re-balanced after the close of business on the third Friday in
the March, June, September and December quarterly cycle. In addition, the Index
is reviewed on approximately a monthly basis by the CBOE staff. The CBOE has
reserved the right, in its discretion, to change the composition of the Index at
any time or from time to time to reflect changes affecting the components of the
Index or the Latin American markets generally. If the CBOE determines that it is
necessary to remove a component security from the Index, the CBOE has stated
that it will make every effort to add a component that preserves the character
of the Index. In such circumstances, the CBOE will take into account the
capitalization, liquidity, volatility, and name recognition of the proposed
replacement component. CBOE will not decrease the number of Component Securities
to less than ten. Additionally, the CBOE will not make any composition change to
the Index that would result in less than 80% of the number of components or 80%
of the weight of the Index satisfying the initial listing criteria in CBOE Rule
5.3, Interpretation and Policy .01 (for components which are not the subject of
standardized options trading) or the maintenance criteria in CBOE Rule 5.4,
Interpretation and Policy .01 (for components which are currently the subject of
standardized options trading).
None of the Company, Salomon Smith Barney or the Trustee under the Senior
Debt Indenture accepts any responsibility for the calculation, maintenance or
publication of the Index. The CBOE disclaims all responsibility to the Company
for any errors or omissions in the calculation and dissemination of the Index or
the manner in which the Index is applied in determining any Supplemental
Redemption Amount.
The policies of each of the three closed-end country funds included in the
Index concerning purchases and sales of the Latin American securities underlying
each fund may affect the value of the fund and, in turn, the Index. The policies
of each fund with respect to the calculation of the value of the fund could also
affect the value of the Index. None of the Company, Salomon Smith Barney or the
CBOE take responsibility for the determination of such policies by the country
funds.
S-22
<PAGE> 23
HISTORICAL DATA ON THE INDEX
The following table sets forth the value of the Index at the end of each
month in the period from June 1995 through August 1998. These historical data on
the Index are not necessarily indicative of the future performance of the Index
or what the value of the Notes may be. Any historical upward or downward trend
in the value of the Index during any period set forth below is not any
indication that the Index is more or less likely to increase or decrease at any
time during the term of the Notes. In addition, the Index was first published by
the CBOE in June 1995, and no historical data regarding the performance of the
Index is available for any period prior to such date.
<TABLE>
<CAPTION>
1995 1996 1997 1998
------ ------ ------ --------
<S> <C> <C> <C> <C>
January................................................... 145.84 146.76 150.89
February.................................................. 128.39 155.69 156.83
March..................................................... 131.29 151.20 167.24
April..................................................... 139.51 156.59 167.03
May....................................................... 141.57 167.20 144.55
June...................................................... 133.68 143.29 177.09 137.20
July...................................................... 138.75 127.91 187.30 141.11
August.................................................... 134.79 132.38 171.58 91.01
September................................................. 129.49 133.02 181.78
October................................................... 118.28 126.47 149.06
November.................................................. 123.70 128.04 156.71
December.................................................. 125.01 132.25 164.61
</TABLE>
The closing value of the Index on September 10, 1998 was 80.84.
S-23
<PAGE> 24
HISTORICAL MONTH-END CLOSING VALUES
The following graph illustrates the historical performance of the Index
based on the closing value thereof at the end of each month from June 1995
through August 1998 and as of September 10, 1998. Past movements of the Index
are not necessarily indicative of future Index values.
LATIN 15(TM) INDEX MONTHLY PERFORMANCE CHART [GRAPH]
<TABLE>
<CAPTION>
JUN-95 133.68
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) 138.75
134.79
<S> <C>
SEP-95 129.49
118.28
123.7
DEC-95 125.01
145.84
128.39
MAR-96 131.29
139.51
141.57
JUN-96 143.29
127.91
132.38
SEP-96 133.02
126.47
128.04
DEC-96 132.25
146.76
155.69
MAR-97 151.2
156.59
167.2
JUN-97 177.09
187.3
171.58
SEP-97 181.78
149.06
156.71
DEC-97 164.61
150.89
156.83
MAR-98 167.24
167.03
144.55
JUN-98 137.2
141.11
91.01
SEP-98 80.84
</TABLE>
LICENSE AGREEMENT
The CBOE has entered into a license agreement with the Company which
authorizes the Company to make use of and reference to the Index in connection
with the offering of the Notes.
The Notes are not sponsored, endorsed, sold or promoted by the Chicago
Board Options Exchange. CBOE makes no representation or warranty, express or
implied, to the holders of the Notes or any member of the public regarding the
advisability of investing in securities generally or in the Notes particularly
or in the ability to the Index to track the performance of any market segment.
CBOE has no obligation to take the needs of the Company or the holders of the
Notes into consideration in determining, composing or calculating the Index.
CBOE is not responsible for, and has not participated in the determination of,
the timing of the sale of the Notes, prices at which the Notes are to initially
be sold, 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.
CBOE has no obligation or liability in connection with the administration or
marketing of the Notes.
CBOE DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX
OR ANY DATA INCLUDED THEREIN. CBOE MAKES NO WARRANTY, EXPRESS
S-24
<PAGE> 25
OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE COMPANY, HOLDERS OF THE NOTES,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED
THEREIN. CBOE MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OF FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, IN NO EVENT SHALL CBOE HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
All disclosures contained in this Prospectus Supplement regarding the
Index, including its make-up, method of calculation and changes in its
components, are derived from publicly available information compiled by the
CBOE. None of the Company, Salomon Smith Barney or the Trustee under the Senior
Debt Indenture assumes any responsibility for the accuracy or completeness of
such information.
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 Salomon Smith Barney and special tax 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
S-25
<PAGE> 26
"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 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 a payment of $ on the maturity date (the "Assumed Supplemental
Redemption Amount") in respect of each Unit. 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.
Each Note will be issued at par. However, there will be 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.
S-26
<PAGE> 27
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. Adjustments 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, 1999, 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
S-27
<PAGE> 28
December 31, 1999, satisfies certain documentary evidence requirements for
establishing that it is a non-U.S. holder) or otherwise establishes an
exemption.
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, 1999. 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 Treasury regulations on an
investment in the Notes.
With respect to payments made after December 31, 1999, 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-28
<PAGE> 29
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") between the Company and Salomon Smith Barney, as
sole Underwriter (the "Underwriter"), the Company has agreed to sell to the
Underwriter, and the Underwriter has agreed to purchase from the Company, $
principal amount of Notes.
The Notes are offered subject to receipt and acceptance by the Underwriter,
to prior sale and to the Underwriter's 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 Salomon Smith Barney,
388 Greenwich Street, New York, New York, or through the facilities of the
Depositary, on or about , 1998.
The Company has been advised that the Underwriter proposes 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 $ per Unit, and that the
Underwriter may allow, and each such dealer may reallow, to other dealers a
concession not exceeding $ per Unit. 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 been advised by the Underwriter that the Underwriter may
make a market in the Notes, subject to applicable laws and regulations. However,
the Underwriter is 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
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments the Underwriter
may be required to make in respect thereof.
The Notes may be offered to investors outside the United States. The
Underwriter has 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.
Salomon 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 Securities Dealers, Inc.
regarding the offering by an affiliate of the securities of its parent.
In connection with this offering, the Underwriter 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 Exchange Act, pursuant to which such persons may bid for
or purchase Notes for the purposes of stabilizing their market price. The
Underwriter also may create a short position for its accounts by selling more
Notes in connection with this offering than it is 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.
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
Salomon Smith Barney and/or any affiliate thereof 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 such affiliate may act as
principal or agent in such transactions.
S-29
<PAGE> 30
ERISA MATTERS
No employee benefit plan subject to the fiduciary responsibility provisions
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
any entity with respect to which part or all of its assets constitute assets of
any such Plan, or any government or other plan subject to Federal, state or
local law substantially similar to the fiduciary responsibility provisions of
ERISA ("ERISA Plan") is permitted to purchase, hold or otherwise acquire the
Notes. Any plan that is subject to Section 4975(e)(1) of the Code that is not an
ERISA Plan (for example, individual retirement accounts, individual retirement
annuities or Keogh Plans) may only purchase the Notes if such plan has
determined that the purchase, holding and disposition of such Notes and the
transactions contemplated hereby would not constitute a prohibited transaction
under Section 4975 of the Code for which no exemption is available.
LEGAL MATTERS
Certain legal matters relating to the Notes will be passed upon for the
Company 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 Underwriter by Cleary, Gottlieb, Steen
& Hamilton.
Cleary, Gottlieb, Steen & Hamilton has also acted as special tax counsel to
the Company in connection with the Notes and has, from time to time, acted as
counsel for the Company and certain of its affiliates and may do so in the
future.
S-30
<PAGE> 31
APPENDIX A
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Adjusted Ending Value....................................... S-3, S-16
adjusted issue price........................................ S-26
ADRs........................................................ S-3
Adjustment Factor........................................... S-3, S-16
Assumed Supplemental Redemption Amount...................... S-26
Calculation Agent........................................... S-5
Calculation Day............................................. S-16
Calculation Period.......................................... S-3, S-16
CBOE........................................................ Cover page
Code........................................................ S-26
Company..................................................... S-2
comparable yield............................................ S-26
Component Security.......................................... S-21
Convertibility Law.......................................... S-12
Convertibility Plan......................................... S-12
Contingent Debt Regulations................................. S-25
Depositary.................................................. S-2
Direct Participants......................................... S-20
disposition................................................. S-26
ERISA....................................................... S-30
ERISA Plan.................................................. S-30
Exchange Act................................................ S-6
Foreign Issuer.............................................. S-8
Global Notes................................................ S-20
IMF......................................................... S-12
Index....................................................... S-2
Index Business Day.......................................... S-16
Latin 15(TM) Index.......................................... S-2
Market Disruption Event..................................... S-18
non-U.S. holder............................................. S-28
Notes....................................................... S-2, S-15
NYSE........................................................ S-4
Participants................................................ S-20
Pricing Date................................................ S-3
Primary Market.............................................. S-21
Salomon Smith Barney........................................ S-5
SEC......................................................... S-6
Starting Value.............................................. S-3, S-16
Successor Index............................................. S-18
Supplemental Redemption Amount.............................. S-2
Tax OID..................................................... S-14
Travelers Group............................................. S-6
Trustee..................................................... S-15
Underlying Exchange......................................... S-21
Underlying Securities....................................... S-4
Underwriter................................................. S-29
Underwriting Agreement...................................... S-29
Unit........................................................ S-2
U.S. holder................................................. S-25
</TABLE>
A-1
<PAGE> 32
APPENDIX B
LIST OF SECURITIES COMPRISING THE LATIN 15(TM) INDEX
Based upon information provided by the CBOE, the following is a list of
companies and closed-end country funds whose securities comprise the Latin
15(TM) Index and their respective approximate percentage weights in the Index as
of September 9, 1998.
<TABLE>
<CAPTION>
COMPANY INDEX WEIGHT
------- ------------
<C> <S> <C>
1. Argentina Fund Inc. ........................................ 6.29%
2. Aracruz Celulose............................................ 9.63%
3. Banco Santander Chile....................................... 5.97%
4. Brazil Fund Inc. ........................................... 11.92%
5. Brazilia Equity Fund Inc. .................................. 11.49%
6. Compania de Telefonos de Chile.............................. 6.65%
7. Empresas La Moderna SA de CV................................ 8.36%
8. Empresa Nacional Electricidad Chile......................... 5.39%
9. Grupo Tribasa SA de CV...................................... 3.54%
10. Coca Cola Femsa SA de CV.................................... 4.71%
11. Telefonica de Argentina SA.................................. 5.96%
12. Telefonos de Mexico SA de CV................................ 5.63%
13. Grupo Televisa SA Global.................................... 3.61%
14. Vitro Sociedad Anonima...................................... 4.11%
15. YPF Sociedad Anonima........................................ 6.73%
</TABLE>
B-1
<PAGE> 33
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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 SUPPLEMENT 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-6
Risk Factors Relating to the Notes.... S-7
Description of the Notes.............. S-15
The Latin 15(TM) Index................ S-21
Certain United States Federal Income
Tax Considerations.................. S-25
Underwriting.......................... S-29
ERISA Matters......................... S-30
Legal Matters......................... S-30
Index of Terms........................ A-1
List of Securities Comprising the
Latin 15(TM) Index.................. B-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>
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UNITS
SALOMON SMITH
BARNEY HOLDINGS INC.
WORLD INDEX ALLOCATION
SERIES 1998
PRINCIPAL-PROTECTED EQUITY LINKED NOTES
BASED UPON THE
LATIN 15(TM) INDEX
DUE , 2005
($10 PRINCIPAL AMOUNT PER UNIT)
------------
PROSPECTUS SUPPLEMENT
, 1998
(INCLUDING PROSPECTUS
DATED DECEMBER 1, 1997)
------------
SALOMON SMITH BARNEY
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