<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]
[A member of Travelers Group [umbrella]]
PROSPECTUS SUPPLEMENT SAFETY FIRST(SM) INVESTMENTS
(To Prospectus Dated December 1, 1997)
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
ASIA TIGER 100(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 "ATE".
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 Asia Tiger 100(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 Asia Tiger 100(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.
"Asia Tiger 100(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 Asia Tiger 100(TM) Index, as published by the Chicago Board
Options Exchange ("CBOE"). You should carefully read the entire Prospectus and
Prospectus Supplement to fully understand the terms of the Notes, certain
information regarding how the Asia Tiger 100(TM) Index (the "Asia Tiger 100(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 Asia
Tiger 100(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 Asia Tiger 100(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 Asia Tiger
100(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 component stocks comprising the Asia
Tiger 100(TM) Index or certain futures or options relating to the Index 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.
Supplemental Redemption Amount -- Examples
Here are two examples of hypothetical Supplemental Redemption Amount
calculations:
Example 1: The average of the values of the Asia Tiger 100(TM) Index over
the months prior to maturity, as adjusted, is less than the Starting Value:
Hypothetical Starting Value: 128.42
Hypothetical Adjusted Ending Value (calculated using the Adjustment
Factor): 96.32
<TABLE>
<C> <C> <C> <S> <C>
96.32 - 128.42
Supplemental Redemption Amount (per Unit) = $10 X ---------------- = $0
128.42
(Supplemental Redemption Amount
cannot be less than zero)
</TABLE>
Total payment at maturity (per Unit) = $10 + $0 = $10
S-3
<PAGE> 4
Example 2: The average of the values of the Asia Tiger 100(TM) Index over
the months prior to maturity, as adjusted, is greater than the Starting
Value:
Hypothetical Starting Value: 128.42
Hypothetical Adjusted Ending Value (calculated using the Adjustment
Factor): 192.63
<TABLE>
<C> <C> <S>
192.63 - 128.42
Supplemental Redemption Amount (per Unit) = $10 X ------------------ = $5
128.42
</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 INDEX AND WHAT DOES IT MEASURE?
The Asia Tiger 100(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 stocks. The stocks underlying the Asia Tiger
100(TM) Index have been selected in an attempt to represent the 100 stocks of
Asian issuers trading on the principal Asian stock exchanges that have among the
highest capitalizations (in U.S. dollar terms) of stocks listed and traded on
such principal stock exchanges. On September 9, 1998, the CBOE removed all
Malaysian stocks from the Index. For that reason, the Index will be comprised of
86 rather than 100 stocks until additional stocks from other Asian countries are
added and the Index is rebalanced at the end of September 1998. Appendix B
contains a list of the stocks that currently comprise the Index. You should
refer to the section "Asia Tiger 100(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 included in the
Index.
HOW HAS THE ASIA TIGER 100(TM) INDEX PERFORMED HISTORICALLY?
We have provided a table showing the closing value of the Asia Tiger
100(TM) Index on the last business day of each month from January 1996 through
August 1998. You can find this table in the section "The Asia Tiger 100(TM)
Index -- Historical Data on the Asia Tiger 100(TM) Index" in this Prospectus
Supplement. We have provided this historical information to help you evaluate
the behavior of the Asia Tiger 100(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 Asia Tiger 100(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
S-4
<PAGE> 5
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 Note at original issue for $10 and hold the Note until
maturity, you will be required to pay taxes on the following amounts of ordinary
income from the Note each year: $ 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 Note 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 "ATE". 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 Asian 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.
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.
S-5
<PAGE> 6
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 Asia Tiger 100(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 Asia
Tiger 100(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 Asia Tiger 100(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 Asia
Tiger 100(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 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 stocks underlying
the Index and received the dividends paid on those stocks because of the
reduction caused by the Adjustment Factor and because the CBOE calculates the
Index by reference to the prices of the common stocks comprising the Index
without taking into consideration the value of dividends paid on those stocks.
Effect of Adjustment Factor. Because the actual index values of the Asia
Tiger 100(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 Asia Tiger 100(TM) Index, but was not subject to such
adjustment.
S-7
<PAGE> 8
CURRENCY EXCHANGE RATES
The price of the stocks that comprise the Index are converted into U.S.
dollars using the cross-rate to the U.S. dollar in effect in each country in
which stocks underlying the Index are traded on an exchange. You should refer to
"The Asia Tiger 100(TM) Index". 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 stocks underlying the
Index are traded on an exchange 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 ASIA TIGER 100(TM) INDEX
The historical Asia Tiger 100(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 stocks underlying the Index will determine the
value of the Asia Tiger 100(TM) Index, it is impossible to predict whether the
value of the Index will fall or rise. Trading prices of the stocks underlying
the Asia Tiger 100(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
underlying stocks are traded, and by various circumstances that can influence
the values of the underlying stocks in a specific market segment or a particular
underlying stock. You should refer to "-- Risk Factors Relating to Foreign
Jurisdictions" below.
The policies of the CBOE concerning additions, deletions and substitutions
of the stocks underlying the Asia Tiger 100(TM) Index and the manner in which
the CBOE takes account of certain changes affecting such underlying stock 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 Asia Tiger 100(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
Asia Tiger 100(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 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 Asian dividend rates (i.e., dividends per share) may increase
the value of the Index, while falling Asian dividend rates may decrease the
value of the Index. Political, economic and other developments that affect the
stocks underlying
S-8
<PAGE> 9
the Index 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.
Asian Interest Rates. Interest rates in the Asian 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 Asian countries may lower the
value of the Index and the Notes. Falling interest rates in such Asian 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 Asian 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. 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 during the -month Calculation
Period, this time premium may decrease, adversely affecting the trading value of
the Notes.
Dividend Yields. If dividend yields on the underlying stocks comprising
the Index increase, 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 on the stocks comprising the Index decrease, 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 the companies whose
common stocks comprise 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.
S-9
<PAGE> 10
RISK FACTORS RELATING TO FOREIGN JURISDICTIONS
Investment in securities indexed to the value of Asian equity securities
involves a high degree of risk. Asian securities markets have been extremely
volatile and have experienced significant declines recently. A decline in any
one market may cause a similar decline in one or more other markets. Countries
reflected in the Index have experienced economic difficulties over at least the
last year which have adversely affected, and could continue to adversely affect
the stock prices of companies included in the Index. (References to countries in
this Prospectus Supplement include Hong Kong, which is a Special Administrative
Region of the People's Republic of China.) Individual companies in each of the
constituent countries underlying the Index, particularly those with significant
indebtedness or 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
Index Exchanges (as defined below) in general, or that the value of the stocks
underlying the Index in particular, will not continue to decline, thereby
reducing the value of the Index and the Notes purchased by investors.
Certain of the Index Exchanges 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 Index Exchanges 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, or by suspension of trading, on individual stocks which comprise
the Index which may, in turn, adversely affect the value of the Notes or result
in the occurrence of a Market Disruption Event. Government or government-related
entities in certain jurisdictions may also intervene in various ways in local
equity markets. Such intervention or its cessation can affect the value of
securities in such jurisdictions and the value of the Index and the Notes.
Since July 1997, each of the currencies of Indonesia, the Philippines, the
Republic of Korea and Thailand has lost at least 30% of its value, measured
against the U.S. dollar. Each of the currencies of Singapore and Taiwan also has
experienced significant declines during the past fourteen months. In response to
these reductions in value, the governments of these constituent countries have
taken certain measures to stabilize their currencies, including in some cases
raising official interest rates, reducing domestic spending and implementing
other austerity measures. In Indonesia, the Republic of Korea and Thailand, the
International Monetary Fund (the "IMF") has intervened in an effort to help
stabilize these countries' economies. In return, the IMF has imposed or sought
to impose certain stringent economic controls on Indonesia, the Republic of
Korea and Thailand. These controls may directly or indirectly adversely affect
in the near term future performance of one or more companies whose stock is
among the stocks underlying the Index. To the extent that the IMF does not
proceed or is delayed in making loans to Indonesia, the Republic of Korea or
Thailand, any such country's economy, currency and stock market could experience
further significant declines. The currency fluctuations, as well as high
interest rates in certain countries represented in the Index, such as Hong Kong,
have adversely affected economic growth in those countries and in other
countries and jurisdictions in Asia generally, and may continue to do so. Such
currency fluctuations and high interest rates also could adversely affect the
issuers of stocks underlying the Index in reducing the availability of credit or
other financing sources. These developments also could have a material adverse
effect on the price of each underlying stock and on the value of the Notes.
As compared to United States securities markets, Asian securities markets
may be affected by different factors and developments or in different ways based
on comparable factors and developments. Prices of the stocks underlying the
Index 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 Asian countries may cause volatility or a
decline in other Asian countries. The continuing weakness of the Japanese
economy and the recent depreciation of the Japanese yen against the U.S. dollar,
for example, have increased the uncertainty of the economic stability in Asia in
general. Considerations with respect to each country and the approximate
percentage of the Index (as of September 9, 1998) represented by each such
country are set forth below.
S-10
<PAGE> 11
Hong Kong (40% of Index). Hong Kong stocks have experienced a significant
decline since July 1, 1997 (approximately 48% as of September 10, 1998, as
measured by the Hang Seng Index). In addition, continuing sales of Hong Kong
securities by foreign investors and subsequent repatriation of the proceeds of
such sales could adversely affect the foreign currency reserves held by
financial institutions in Hong Kong and the ability of Hong Kong companies to
raise capital. Moreover, commencing on August 14, 1998, the government of Hong
Kong has used its foreign currency reserves to purchase securities listed on the
Stock Exchange of Hong Kong. While such purchases by the government had the
short-term effect of raising the stock prices in Hong Kong, no assurances can be
given that such purchases by the government will continue or will be
sustainable, and no assurances can be given as to the future positive effects,
if any, of such purchases on the Hong Kong securities markets. Recent
fluctuations in the value of certain Asian currencies in relation to the Hong
Kong dollar (the "HKD") could have a material adverse effect on Hong Kong's
economy, as well as on the securities underlying the Index that are listed on
the Stock Exchange of Hong Kong. The value of the HKD is pegged to the value of
the U.S. dollar at approximately HKD 7.80 to U.S.$1.00. The HKD has been the
subject of heavy speculation by currency traders and has required support from
Hong Kong's central bank, including keeping interest rates artificially high.
Although Hong Kong continues to have significant U.S. dollar reserves, there is
concern that the Hong Kong government may decide not to maintain the HKD/U.S.
dollar peg and allow the HKD to devalue against the U.S. dollar in the future.
Any such devaluation could have a negative effect on the economic growth of Hong
Kong and of the entire Asian region. In July 1997, Hong Kong became a Special
Administrative Region of the People's Republic of China. Although the
Sino-British Joint Declaration on the Question of Hong Kong and the Basic Law of
Hong Kong provide that Hong Kong will have a high degree of autonomy and enjoy
executive, legislative and independent judicial power, no assurances can be
given as to the continuation of free market economic policies on which Hong
Kong's past economic success has in large part been based. Developments in the
People's Republic of China have, from time to time, affected Hong Kong's
economic growth and stability.
Taiwan (26% of Index). Taiwanese stocks have experienced a significant
decline since July 1, 1997 (approximately 25% as of September 10, 1998, as
measured by the Taiwan Weighted Index). In addition, there have been public
reports in the past that the Taiwan Stock Exchange has experienced problems such
as market manipulation, insider trading and payment defaults. The recurrence of
these or similar problems could adversely affect the market price and liquidity
of the securities of the Taiwanese companies, both in the Taiwan and in the
international markets. The Taiwan dollar has experienced a significant decline
in value relative to the U.S. dollar since July 1, 1997 (approximately 20% as of
September 10, 1998). The Taiwanese economy and the stocks underlying the Index
that are Taiwanese are subject to particular volatility in the event of currency
fluctuations, because approximately 55% of Taiwan's exports are to other Asian
countries. Moreover, Taiwanese industries depend heavily on imported oil and raw
materials, and a currency devaluation will mean higher operating costs and lower
profits for many Taiwanese companies.
Singapore (13% of Index). Singaporean stocks have experienced a
significant decline since July 1, 1997 (approximately 55% as of September 10,
1998, as measured by the Straits Times Index). The Singapore dollar has
experienced a decline in value relative to the U.S. dollar since July 1, 1997
(approximately 17% as of September 10, 1998). No assurances can be given as to
the value of the Singapore dollar, the value of Singapore securities or the
strength of Singapore's economy as compared to other Asian nations' markets
generally.
Republic of Korea (10% of Index). Korean stocks have experienced a
significant decline since July 1, 1997 (approximately 55% as of September 10,
1998, as measured by the Seoul Composite Index). The Republic of Korea has
significant foreign debt, the default of which could have a material adverse
effect on its economy. The Korean won has experienced a significant decline in
value relative to the U.S. dollar since July 1, 1997 (approximately 35% as of
September 10, 1998). In order to partially address the liquidity and credit
crisis and the adverse economic situation in the Republic of Korea, its
government reached an agreement with the IMF on a financial aid package on
December 3, 1997. Subject to the terms and conditions of the IMF financial aid
package, the Republic of Korea will receive loans in an aggregate amount of
approximately $58 billion from the IMF, the World Bank, the Asia Development
Bank and from the governments of certain countries. There are strict conditions
to the availability of loans under the IMF
S-11
<PAGE> 12
financial aid package. There can be no assurance that such conditions will be
satisfied or that such loans will be available or adequate. If such conditions
are not satisfied and consequently loans and other financial support under the
IMF financial aid package are not available, the Republic of Korea and,
indirectly, financial institutions and companies in the Republic of Korea would
lose an important source of foreign currency borrowings that may be used to
service external debt. Furthermore, further declines in liquidity and
availability of credit, further deterioration in the Republic of Korea's economy
and increased downward pressure on the value of the won could result. In such
circumstances, there can be no assurance that the Republic of Korea and the
other Republic of Korean borrowers will be able to pay their debts as they
become due. In light of the recent events affecting the Republic of Korea and
the stringent conditions of the IMF financial aid package, the government of the
Republic of Korea has announced that it anticipates that several indicia of the
Republic of Korea's economic performance will worsen in 1998 compared to 1997.
For example, the Republic of Korea's gross domestic product is expected to
contract by 4% in 1998 compared to growth of 5.5% in 1997 and the consumer price
index is expected to increase by slightly below 10% in 1998 compared to 4.5% in
1997. Actual performance of the economy could vary from these expected rates. As
a result of the expected general contraction of the economy, the unemployment
rate is expected to increase significantly in the near- to medium-term. Further
economic decline may lead to continued bankruptcies of large Korean publicly
traded companies given the country's large foreign debt, much of which is U.S.
dollar-denominated. The combination of these circumstances could negatively
affect the Korean securities markets generally and the stocks underlying the
Index that are listed on the Korean Stock Exchange.
Philippines (5% of Index). Philippine stocks have experienced a
significant decline since July 1, 1997 (approximately 61% as of September 10,
1998, as measured by the PSE Composite Index). The Philippine peso has
experienced a significant decline in value relative to the U.S. dollar since
July 1, 1997 (approximately 40% as of September 10, 1998). The combination of a
slowdown of economic activity and the decline in the market value of the
Philippine peso could negatively affect the Philippine securities markets
generally and the stocks underlying the Index that are listed on the Philippine
Stock Exchange.
Indonesia (3% of Index). Indonesian stocks have experienced a significant
decline since July 1, 1997 (approximately 55% as of September 10, 1998, as
measured by the Jakarta Composite Index). At the date hereof the Indonesian
economy remains very unstable. It has been reported that as much as $85 billion
in business capital has fled the country as a result of the violence directed
against ethnic Chinese in the spring of 1998. Indonesia is a major oil exporter
and has also been adversely affected by the recent decline in world oil prices.
Interest rates have increased (to support the currency) and there have been
delays in infrastructure development in order to improve Indonesia's current
account and fiscal position. As of July 1998, the country had approximately $129
billion in foreign debt. Indonesia has negotiated a $43 billion bailout package
with the IMF, about $4.9 billion of which has been disbursed through August
1998. The terms and conditions of the IMF loan require certain cost reductions
that may have a material adverse effect on the Indonesian economy in the near
future. This has caused continued volatility in the Indonesian rupiah, which has
experienced a significant decline in value relative to the U.S. dollar since
July 1, 1997 (approximately 80% as of September 10, 1998). The economic crisis
contributed to the civil unrest that took place in May 1998, which eventually
led to the installation of a new president, B.J. Habibie, on May 21, 1998.
Continued economic and political instability in Indonesia could lead to
continuing social unrest in the country and adversely impact the economy and the
value of equity securities.
Thailand (3% of Index). Thai stocks have experienced a significant decline
since July 1, 1997 (approximately 59% as of September 10, 1998, as measured by
the SET Index) and there can be no assurance that it will not decline further or
continue to be volatile. The stock price decline and volatility could adversely
affect the Thailand securities markets generally and the stocks underlying the
Index that are listed on the Stock Exchange of Thailand. The Thai baht has
experienced a significant decline in value relative to the U.S. dollar since
July 1, 1997 (approximately 37% as of September 10, 1998). The Thai government
abandoned its long time link between the baht and the U.S. dollar in July 1997.
The Thai economy may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rates of inflation, and
capital reinvestment. Thailand received a $17 billion loan package from the IMF
in 1997. The terms and conditions of the IMF loan require certain cost
reductions that are expected to have a material adverse effect
S-12
<PAGE> 13
on the Thai economy in the near future. Among other things, increased currency
reserve requirements pursuant to the IMF loan agreements have created a
liquidity crisis which may cause additional failures of financial institutions.
No assurances can be given as to the positive effect, if any, of the IMF bailout
or the stringent guidelines imposed by the IMF. The withholding of funds by the
IMF due to a failure to implement IMF guidelines or for any other reason could
have a material adverse effect on the Thai economy and securities markets.
Demand for domestic goods is expected to continue to decrease for the near term
thereby reducing growth prospects for many of the country's key industries
including automobiles, durable goods and real estate.
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 take
place in any one of the many U.S. and international securities exchanges on
which Asian stocks and related derivative securities trade. You should refer to
"Description of the Notes -- Market Disruption Events", "-- Discontinuance of
the Asia Tiger 100(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 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 stocks underlying the Index or derivative
instruments related to the Index for their own accounts in connection with their
normal business practices or in connection with hedging the Company's
obligations under the Notes. These transactions could affect the price of such
stocks 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.
S-13
<PAGE> 14
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.
S-14
<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 Asia Tiger
100(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.
S-15
<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 Asia
Tiger 100(TM) 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 Asia Tiger(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
pro rata on a daily basis 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 New York Stock Exchange (the "NYSE"), the CBOE and
each of the Index Exchanges (as defined below) 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
stock underlying the Index 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 128.42 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 stocks underlying
the Index (which includes an assumed aggregate dividend yield of 2.00% 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%.
S-16
<PAGE> 17
<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(2) ENDING VALUE(1) STARTING VALUE AMOUNT OF NOTES THE NOTES
- --------------------- --------------- ------------------ ------------------- -------------
<S> <C> <C> <C> <C>
109.16 98.20 -23.53% $10.00 0.00%
115.58 103.97 -19.04% $10.00 0.00%
122.00 109.75 -14.54% $10.00 0.00%
128.42(5) 115.53 -10.04% $10.00 0.00%
134.84 121.30 -5.54% $10.00 0.00%
141.26 127.08 -1.04% $10.00 0.00%
147.68 132.86 3.45% $10.35 3.45%
154.10 138.63 7.95% $10.80 7.95%
160.53 144.41 12.45% $11.25 12.45%
166.95 150.19 16.95% $11.69 16.95%
173.37 155.96 21.45% $12.14 21.45%
179.79 161.74 25.95% $12.59 25.95%
186.21 167.52 30.44% $13.04 30.44%
192.63 173.29 34.94% $13.49 34.94%
199.05 179.07 39.44% $13.94 39.44%
205.47 184.84 43.94% $14.39 43.94%
211.89 190.62 48.44% $14.84 48.44%
218.31 196.40 52.93% $15.29 52.93%
224.74 202.17 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% -0.31%
0.00% 0.50%
0.00% 1.27%
0.00% 2.00%
0.00% 2.70%
0.00% 3.38%
0.49% 4.02%
1.10% 4.64%
1.68% 5.24%
2.25% 5.81%
2.79% 6.37%
3.32% 6.91%
3.83% 7.43%
4.32% 7.93%
4.80% 8.42%
5.27% 8.90%
5.72% 9.36%
6.16% 9.81%
6.58% 10.25%
</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 2.00% 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 the sale 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 Starting Value,
the actual Adjusted Ending Value and the actual Adjustment Factor determined by
the actual 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 Asia Tiger 100(TM) Index is included in
this Prospectus Supplement under "The Asia Tiger 100(TM) 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 underlying stocks which then comprise the Index or any Successor Index,
in each case, for more than two hours of trading or during the one-half
hour period preceding the close of trading on the primary exchange on which
each such stock 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 stocks underlying the Index or any Index 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 underlying stocks which then comprise the Index or any Successor
Index or in respect of futures contracts, options on futures contracts or
options contracts traded on any major U.S. or international exchange
related to the Index, any Successor Index, any stocks underlying the Index
or any Index 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 and (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. 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.
DISCONTINUANCE OF THE ASIA TIGER 100(TM) INDEX
If the CBOE discontinues publication of the Asia Tiger 100(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".
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
S-18
<PAGE> 19
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 Asia Tiger 100(TM) Index as described above, such
Successor Index or value shall be substituted for the Asia Tiger 100(TM) 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 Asia Tiger
100(TM) Index may adversely affect the value of the Notes.
ALTERATION OF METHOD OF CALCULATION
If at any time the method of calculating the Asia Tiger 100(TM) 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.
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.
S-19
<PAGE> 20
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 Asia
Tiger 100(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 ASIA TIGER 100(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 takes any responsibility for
the accuracy or completeness of such information.
The Index was designed by and will be maintained by the CBOE in its sole
discretion. The Index currently is comprised of 86 stocks chosen by the CBOE of
companies domiciled in certain Asian countries (which may be changed subject to
certain conditions and criteria), which are listed and traded on the principal
stock exchange for each country. The stocks underlying the Index were selected
by the CBOE to have among the highest capitalizations (in U.S. dollar terms) of
stocks listed and traded on such Index Exchanges. On September 9, 1998, the CBOE
removed all Malaysian stocks from the Index. For that reason, the Index will be
comprised of 86 rather than 100 stocks until additional stocks from other Asian
countries are added and the Index is rebalanced at the end of September 1998. A
list of the stocks underlying the Index as of the date hereof is attached as
Appendix B hereto.
As of the date hereof, the countries in which the stocks underlying the
Index are traded on an exchange are Hong Kong, Taiwan, the Republic of Korea,
Thailand, Indonesia, the Philippines and Singapore. The CBOE may from time to
time change the composition of the constituent countries.
"Index Exchanges" means certain stock exchanges or trading facilities in
the constituent countries on which the stocks comprising the Index are listed
and traded from time to time as determined by the CBOE. As of the date hereof,
the Index Exchanges are: for Hong Kong, the Stock Exchange of Hong Kong; for
Taiwan, the Taiwan Stock Exchange; for Singapore, the Stock Exchange of
Singapore; for the Republic of Korea, the Korea Stock Exchange; for Indonesia,
the Jakarta Stock Exchange; for the Philippines, the Philippine Stock Exchange;
and for Thailand, the Stock Exchange of Thailand.
The stocks comprising the Index are viewed by the CBOE as representative of
the composition of the broader equity markets in each of the constituent
countries. The total capitalization of the stocks underlying the Index on
September 2, 1998 (prior to the removal of all Malaysian stocks from the Index)
was approximately $338 billion.(1) The average capitalization of the stocks
underlying the Index on that date was approximately $3.38 billion. The
individual market capitalization of the stocks underlying the Index ranged from
approximately $178 million to $38 billion on September 2, 1998. These stocks had
average daily U.S. dollar trading volume in 1997 ranging from $146 million to
$38 billion.
The Index is a modified capitalization-weighted index. Accordingly, as of
the date of commencement of the Index and each rebalancing date, each stock
underlying the Index is expected to be assigned a stock weight determined by the
CBOE reflecting the market value of shares listed on the relevant Index Exchange
relative to the market value of other stocks underlying the Index for the
relevant constituent country. Additionally, the Index weights each constituent
country based on the relative size of its Index Exchange (in U.S. dollar terms)
in relation to those of the other constituent countries. The CBOE believes this
design gives the Index significant coverage of the countries' largest and most
liquid stocks and enables the Index to serve as a proxy for the stock portfolios
held by foreign investors in these countries. The Index base value was set to
equal 200 on November 17, 1997.
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.
- ---------------
(1)All values are expressed in U.S. dollars at the prevailing exchange rates on
September 2, 1998.
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<PAGE> 22
STOCK SELECTION CRITERIA
Stocks selected in the Index include some of the highest capitalization
stocks of a constituent country that are available to foreign investors and that
are actively traded. The stock selection criteria include the following: (1) the
minimum market value of the stock underlying the Index listed on the Index
Exchange during the past year must have been greater than $200 million; (2) the
minimum dollar trading value of turnover of the underlying stock during such
past year must have been $100 million; (3) the minimum monthly trading value of
the underlying stock in any month during such past year must have been greater
than $5 million; (4) the underlying stock must have traded on at least 95% of
the trading days of the relevant constituent country during the past year; and
(5) at least 20% of a company's total outstanding shares (whether traded on the
Index Exchange or otherwise) must be available to foreign investors, as
determined by CBOE after taking into account applicable laws, stock exchange
regulations and cross-holding limitations (collectively, the "Stock Selection
Criteria").
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 daily calculation of the Index is computed with the use of an "Index
Divisor". In order to maintain continuity in the Index in the event of certain
changes due to non-market factors affecting the stocks underlying the Index,
such as the addition or deletion of stocks, substitution of stocks, stock
dividends, stock splits or distributions of assets to stockholders, the Index
Divisor used in calculating the Index will be adjusted in a manner designed to
prevent any instantaneous change or discontinuity in the level of the Index and
in order that the level of the Index immediately after such change will equal
the value of the Index immediately prior to such change. Thereafter, the Index
Divisor will remain the same until a further adjustment is necessary as the
result of another change, or until the next rebalancing date. The value of the
Index will be calculated by CBOE and disseminated once each Index Calculation
Day (as defined below) based on the most recent closing prices of the stocks
underlying the Index quoted by the relevant Index Exchanges prior to the opening
of trading in the U.S. via the Options Price Reporting Authority or the
Consolidated Tape Association. In the event that an underlying stock does not
trade on a given day, the previous day's last sale price will be used for
purposes of calculating the Index. The CBOE is under no obligation to continue
the calculation and/or the dissemination of the Index.
In calculating the Index, the CBOE will value the stocks underlying the
Index based upon the closing prices on the relevant Index Exchange. The CBOE
will value such underlying stocks on each Index Calculation Day in U.S. dollars
using the cross-rate to the U.S. dollar of the currency of the appropriate
constituent country. Bloomberg's Composite New York rates, or comparable rates
from a nationally recognized source, quoted at 7:00 a.m. Chicago time will be
used to convert the prices of stocks underlying the Index from the respective
currencies to U.S. dollars. If there are several quotes at 7:00 a.m. for any
currency, the first quoted rate in that minute will be used to calculate the
Index. In the event that there is no Bloomberg exchange rate for a constituent
countries currency at 7:00 a.m., underlying stocks will be valued at the first
U.S. dollar cross-rated quoted by Bloomberg or from a nationally recognized
source prior to 7:00 a.m.
"Index Calculation Day" means any day that the Index or Successor Index is
calculated and published by the CBOE (or by another entity as described under
"Description of the Notes -- Discontinuance of the Index").
INDEX MAINTENANCE AND REBALANCING
Country weights are based upon the relative capitalization of the relevant
Index Exchange, in U.S. dollar terms, compared to other Index Exchanges at the
time the Index was established and will be determined annually in March of each
year, subject to availability of information. Calculations will be made as of
the last trading day for the relevant Index Exchange of the prior year. Country
weights will be rounded to the nearest 2% based on the International Federation
of Stock Exchanges month-end market value calculations used in
S-22
<PAGE> 23
the country rebalancing. There will be a 4% limit on the change that will be
made to any country weight at rebalancing so that a single year's aberration for
a particular market does not improperly affect the Index. When required to make
the country weights sum up to 100% due to rounding, the country weight that
normally would be rounded up (down) will be rounded down (up) if the weight is
the closest to the midpoint between two weights. Country weights are capped at
40% for the largest constituent country (currently Hong Kong) and at 15% for
constituent countries with which the CBOE does not have an effective
surveillance sharing agreement. Currently, the CBOE has surveillance sharing
agreements with Hong Kong and Taiwan.
The CBOE will determine in its sole discretion after consultation with the
SEC whether to add or delete a constituent country in the Index. In addition,
the CBOE may determine to maintain the country weight of an constituent country
at no more than 2% level after its calculated country weight has fallen below
1%. The CBOE in its discretion may retain a constituent country whose weight
falls below 1% in the Index. In either of the above cases, the weights of the
other countries will be adjusted accordingly on a pro rata basis. The CBOE's
determinations will be based on its perceptions of the market's openness to
foreign investors, the current level of foreign investment in the country, and
other factors. Once a country's weight is determined, the individual stocks
within a market will be selected based on the Stock Selection Criteria. The CBOE
anticipates that the number of stocks underlying the Index for any constituent
country will approximately equal the relevant country weight.
Stock weights will be determined initially by the CBOE based on relative
capitalization of stocks underlying the Index for a constituent country. Stock
weights will be rebalanced by the CBOE semi-annually in March and September of
each year, also subject to availability of information. Calculations will be
made as of the date of rebalancing. In connection with rebalancing, eligible
stocks will be ranked by capitalization in the relevant market on the date of
the rebalancing. The CBOE will select stocks based on the Stock Selection
Criteria, market capitalization of the company and a stock's liquidity. Each
underlying stock selected by the CBOE will then be assigned a stock weight,
determined by the CBOE, reflecting its capitalization on the relevant Index
Exchange relative to the capitalization of other underlying stocks for the
relevant constituent country as of such date. In addition, the stock weight will
also be adjusted on each rebalancing date, such that the total value of the
stocks underlying the Index for each country in the Index is consistent with the
most recently determined country weight for such country. The stocks underlying
the Index may need to be replaced in between rebalancings due to corporate,
governmental or regulatory actions or when the stock no longer meets the Stock
Selection Criteria. In such cases, the CBOE will generally replace a particular
underlying stock with a stock from a replacement list of stocks maintained by
the CBOE. Underlying stock weights will be capped such that the weight of the
largest underlying stock in a constituent country may not be greater than 50% of
that country's weight at rebalancing. In such case, weights of the other stocks
underlying the Index of the constituent country will be adjusted accordingly. As
a result of such weightings certain stocks underlying the Index may be included
for a constituent country which have a lower capitalization than eligible stocks
from other constituent countries which were not included in the Index.
The CBOE has indicated that it intends to use its best efforts to provide
notice to market participants who have requested such notification regarding the
replacement of an underlying stock at least three business days prior to making
such a change. In addition, according to the CBOE, the CBOE will ordinarily
notify such market participants of changes in Index methodology and other
rebalancing results. However, the CBOE does not anticipate disseminating such
information directly to holders of Notes. The Company shall not have any
obligation to notify holders of Notes of any changes with respect to the Index
(including the composition thereof) or rebalancing results.
The CBOE will notify the SEC prior to adding a constituent country to or
deleting a constituent country from the Index, or reducing the number of stocks
underlying the Index below 95 in number. Should the Index fail to meet the
established maintenance or notification criteria, the CBOE may be required by
the SEC to reclassify the Index as a narrow based index, remove certain
securities from the Index or discontinue listing a new series of Index warrants.
Substantial change in the composition of the Index will require reevaluation and
additional approval by the SEC to continue to list Index products.
S-23
<PAGE> 24
None of the Company, the Trustee, the Calculation Agent or the Underwriter
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.
MARKET SURVEILLANCE
The CBOE entered into an information sharing agreement with the Stock
Exchange of Hong Kong (the "SEHK") on October 1, 1992, pursuant to which the
CBOE will be able to obtain market surveillance information from the SEHK. The
CBOE entered into an information sharing agreement with the Taiwan Stock
Exchange in October 1997. The CBOE has not entered into any information sharing
agreements with the Stock Exchange of Singapore, the Korea Stock Exchange, the
Jakarta Stock Exchange, the Philippine Stock Exchange and the Stock Exchange of
Thailand. The absence or ineffectiveness of such agreement with any Index
Exchange reduces the ability of the CBOE to monitor or obtain information
regarding the trading on such Index Exchange of securities included in the Index
and consequently could impact the CBOE's surveillance efforts.
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 January 1996 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. All historical data presented in the
following table relating to periods prior to February 1998 (the date CBOE
commenced Calculation of the Index) are presented as if the Index had existed
during such periods and such closing levels have been calculated hypothetically
on the same basis that the Index is calculated. All historical data presented in
the following table relating to periods after February 1998 are based on actual
performance of the Index.
<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
January...................................... 275.59 325.23 178.68
February..................................... 275.61 329.07 213.31
March........................................ 280.45 313.49 204.07
April........................................ 304.43 298.06 185.88
May.......................................... 300.50 316.33 158.09
June......................................... 303.45 323.52 140.99
July......................................... 284.26 322.60 140.69
August....................................... 295.36 263.80 118.82
September.................................... 305.00 256.94
October...................................... 302.32 198.70
November..................................... 319.65 184.44
December..................................... 320.33 180.59
</TABLE>
The closing value of the Index on September 10, 1998 was 128.42.
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<PAGE> 25
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 January 1996
through August 1998 and as of September 10, 1998. Past movements of the Index
are not necessarily indicative of future Index values.
ASIA TIGER 100(TM) INDEX MONTHLY PERFORMANCE CHART [Graph]
<TABLE>
<CAPTION>
<S> <C>
CLOSING INDEX
MONTH END LEVEL
JAN-96 275.59
275.61
MAR-96 280.45
304.43
MAY-96 300.5
303.45
JUL-96 284.26
295.36
SEP-96 305
302.32
NOV-96 319.65
320.33
JAN-97 325.23
329.07
MAR-97 313.49
298.06
MAY-97 316.33
323.52
JUL-97 322.6
263.8
SEP-97 256.94
198.7
NOV-97 184.44
180.59
JAN-98 178.68
213.31
MAR-98 204.07
185.88
MAY-98 158.09
140.99
JUL-98 140.69
118.82
SEP-98 128.42
</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 of 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.
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<PAGE> 26
CBOE DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX
OR ANY DATA INCLUDED THEREIN. CBOE MAKES NO WARRANTY, EXPRESS 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 OR 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 prepared 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.
S-26
<PAGE> 27
U.S. HOLDERS
Taxation of Interest. A U.S. holder of a Note will recognize income (or
loss) on a Note in accordance with the Contingent Debt Regulations. The
Contingent Debt Regulations require the application of a "noncontingent bond
method" to determine accruals of income, gain, loss and deduction with respect
to a contingent debt obligation. As described in more detail in the second
succeeding paragraph, under the noncontingent bond method, a U.S. holder of a
Note will be required for tax purposes to include in income each year an accrual
of interest at the rate of 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
S-27
<PAGE> 28
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.
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.
S-28
<PAGE> 29
Information Reporting and Backup Withholding. U.S. information reporting
requirements and backup withholding tax will not apply to payments on, or
proceeds from the disposition of, a Note if the beneficial owner certifies its
non-U.S. status under penalties of perjury (or, with respect to payments made
after December 31, 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-29
<PAGE> 30
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 affiliates 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 affiliates may act as
principal or agent in such transactions.
S-30
<PAGE> 31
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-31
<PAGE> 32
APPENDIX A
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Adjusted Ending Value....................................... S-3, S-16
adjusted issue price........................................ S-27
Adjustment Factor........................................... S-3, S-16
Asia Tiger 100(TM) Index.................................... S-2
Assumed Supplemental Redemption Amount...................... S-27
Calculation Agent........................................... S-5
Calculation Day............................................. S-16
Calculation Period.......................................... S-3, S-16
CBOE........................................................ Cover page, S-2
Code........................................................ S-27
Company..................................................... S-2
comparable yield............................................ S-27
Contingent Debt Regulations................................. S-26
Depositary.................................................. S-2
Direct Participants......................................... S-20
disposition................................................. S-27
ERISA....................................................... S-31
ERISA Plan.................................................. S-31
Exchange Act................................................ S-6
Global Notes................................................ S-19
HKD......................................................... S-11
IMF......................................................... S-10
Index....................................................... S-2
Index Business Day.......................................... S-16
Index Calculation Day....................................... S-22
Index Divisor............................................... S-22
Index Exchanges............................................. S-21
Market Disruption Event..................................... S-18
non-U.S. holder............................................. S-28
Notes....................................................... S-2, S-15
NYSE........................................................ S-16
Participants................................................ S-20
Pricing Date................................................ S-3
Salomon Smith Barney........................................ S-5
SEC......................................................... S-5
SEHK........................................................ S-24
Starting Value.............................................. S-3, S-16
Stock Selection Criteria.................................... S-22
Successor Index............................................. S-18
Supplemental Redemption Amount.............................. S-2
Tax OID..................................................... S-13
Travelers Group............................................. S-5
Trustee..................................................... S-15
Underwriter................................................. S-30
Underwriting Agreement...................................... S-30
Unit........................................................ S-2
U.S. holder................................................. S-26
</TABLE>
A-1
<PAGE> 33
APPENDIX B
LIST OF STOCKS UNDERLYING THE ASIA TIGER 100(TM) INDEX
Based upon information provided by the CBOE, the following is a list of the
100 companies whose stocks comprise the Index and their respective approximate
percentage weights in the Index as of September 9, 1998.
<TABLE>
<CAPTION>
HONG KONG INDEX WEIGHT
--------- ------------
(%)
<C> <S> <C>
1. HSBC Holdings PLC........................................... 8.38
2. Hutchison Whampoa........................................... 4.34
3. Hong Kong Telecom........................................... 5.34
4. Hang Seng Bank.............................................. 2.63
5. Sun Hung Kai Properties..................................... 1.84
6. Cheung Kong................................................. 2.34
7. CLP Holdings Limited........................................ 2.67
8. Henderson Land Development.................................. 1.43
9. Citic Pacific Limited....................................... 0.74
10. Hong Kong Electric Holdings................................. 1.52
11. New World Development....................................... 0.54
12. Hong Kong & China Gas....................................... 1.15
13. Cheung Kong Infrastructure.................................. 0.98
14. Wharf Holdings.............................................. 0.66
15. Cathay Pacific Airways...................................... 0.70
16. China Resources Enterprises................................. 0.32
17. Shanghai Industrial Hldg Ltd. .............................. 0.35
18. Swire Pacific Ltd 'B'....................................... 0.31
19. Bank of East Asia........................................... 0.40
20. Henderson Investment Ltd. .................................. 0.34
21. Wheelock & Company Ltd. .................................... 0.30
22. Amoy Properties............................................. 0.39
23. New World Infrastructure Ltd. .............................. 0.16
24. Hysan Development Co. ...................................... 0.18
25. National Mutual Asia Ltd. .................................. 0.26
26. Hang Lung Development Co. .................................. 0.29
27. Cosco Pacific Limited....................................... 0.14
28. Paliburg Holdings Limited................................... 0.20
29. Johnson Electric Hldgs...................................... 0.39
30. Shangri-La Asia Ltd. ....................................... 0.28
31. Television Broadcasts Ltd. ................................. 0.22
32. South China Morning Post.................................... 0.15
=====
Total....................................................... 39.92
Total Country Weight........................................ 39.92%
</TABLE>
B-1
<PAGE> 34
<TABLE>
<CAPTION>
TAIWAN INDEX WEIGHT
------ ------------
(%)
<C> <S> <C>
1. Taiwan Semiconductor........................................ 3.10
2. Cathay Life Insurance....................................... 3.33
3. United Microelectronics Corp. .............................. 1.46
4. China Development........................................... 1.77
5. Chang Hwa Commercial Bank................................... 1.24
6. First Commercial Bank....................................... 1.29
7. Hua Nan Commercial Bank..................................... 1.23
8. Asustek Computer Inc. ...................................... 1.64
9. Nan Ya Plastic.............................................. 1.03
10. Advanced Semiconductor Engr. ............................... 0.74
11. China Steel................................................. 1.38
12. Shin Kong Life Insurance Co. ............................... 0.83
13. Formosa Plastic............................................. 0.97
14. Acer Inc. .................................................. 0.65
15. United World Chinese Com Bnk................................ 0.70
16. Intl Commercial Bank China.................................. 0.81
17. Hon Hai Precision Industry.................................. 0.94
18. Winbond Electronics Corp. .................................. 0.55
19. Chiao Tung Bank Co Ltd. .................................... 0.52
20. Inventec Co Ltd. ........................................... 0.66
21. Formosa Chem & Fibre........................................ 0.55
22. Tatung Co Ltd. ............................................. 0.51
=====
Total....................................................... 25.88
Total Country Weight........................................ 25.88%
</TABLE>
<TABLE>
<CAPTION>
SINGAPORE INDEX WEIGHT
--------- ------------
(%)
<C> <S> <C>
1. Singapore Telecommunications................................ 7.96
2. Singapore Airlines Ltd. .................................... 1.29
3. Oversea-China Banking Ord................................... 0.78
4. United Overseas Bank........................................ 0.58
5. Singapore Press Holdings.................................... 0.84
6. Development Bank of Singapore............................... 0.57
7. City Developments........................................... 0.45
8. Keppel Corp. ............................................... 0.21
9. Creative Technology Limited................................. 0.30
10. DBS Land.................................................... 0.20
11. Fraser & Neave Ltd-Ord...................................... 0.17
12. Singapore Land.............................................. 0.15
=====
Total....................................................... 13.49
Total Country Weight........................................ 13.49%
</TABLE>
B-2
<PAGE> 35
<TABLE>
<CAPTION>
REPUBLIC OF KOREA INDEX WEIGHT
----------------- ------------
(%)
<C> <S> <C>
1. Korea Electric Power Corp. ................................. 4.39
2. Samsung Electronics Co. .................................... 1.83
3. Pohang Iron & Steel Co. .................................... 1.63
4. SK Telecom Co. Ltd. ........................................ 1.07
5. Daewoo Heavy Industries..................................... 0.67
6. Samsung Display Devices..................................... 0.43
=====
Total....................................................... 10.01
Total Country Weight........................................ 10.01%
</TABLE>
<TABLE>
<CAPTION>
PHILIPPINES INDEX WEIGHT
----------- ------------
(%)
<C> <S> <C>
1. Ayala Corporation........................................... 0.73
2. Ayala Land Inc. ............................................ 0.67
3. Philippine Long Distance Tel................................ 1.31
4. Sm Prime Holdings Inc. ..................................... 0.77
5. Metropolitan Bank & Trust................................... 0.54
6. San Miguel Corp-Class A..................................... 0.95
====
Total....................................................... 4.98
Total Country Weight........................................ 4.98%
</TABLE>
<TABLE>
<CAPTION>
INDONESIA INDEX WEIGHT
--------- ------------
(%)
<C> <S> <C>
1. PT Telekomunikasi........................................... 1.10
2. PT Gudang Garam............................................. 0.82
3. PT Indosat.................................................. 0.45
4. Indocement Tunggal Prakarsa................................. 0.53
====
Total....................................................... 2.90
Total Country Weight........................................ 2.90%
</TABLE>
<TABLE>
<CAPTION>
THAILAND INDEX WEIGHT
-------- ------------
(%)
<C> <S> <C>
1. PTT Exploration & Production................................ 1.50
2. Bangkok Bank Public Co Ltd. ................................ 0.38
3. Advanced Info. Services PCL................................. 0.70
4. Thai Farmers Bank Public Co. Ltd. .......................... 0.25
====
Total....................................................... 2.82
Total Country Weight........................................ 2.82%
</TABLE>
B-3
<PAGE> 36
- ------------------------------------------------------
- ------------------------------------------------------
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 Asia Tiger 100(TM) Index.......... S-21
Certain United States Federal Income
Tax Considerations.................. S-26
Underwriting.......................... S-30
ERISA Matters......................... S-31
Legal Matters......................... S-31
Index of Terms........................ A-1
List of Stocks Underlying the Asia
Tiger 100(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>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
UNITS
SALOMON SMITH
BARNEY HOLDINGS INC.
WORLD INDEX ALLOCATION
SERIES 1998
PRINCIPAL-PROTECTED EQUITY LINKED NOTES
BASED UPON THE
ASIA TIGER 100(TM) INDEX
DUE , 2005
($10 PRINCIPAL AMOUNT PER UNIT)
------------
PROSPECTUS SUPPLEMENT
, 1998
(INCLUDING PROSPECTUS
DATED DECEMBER 1, 1997)
------------
SALOMON SMITH BARNEY
- ------------------------------------------------------
- ------------------------------------------------------
