<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO DELIVERY OF A FINAL PROSPECTUS SUPPLEMENT.
THIS PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-17831
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 20, 1996)
Units
Smith Barney Holdings Inc.
Smith Barney S&P 500 Equity Linked Notes due , 2002
---------
Smith Barney Holdings Inc. (the "Company") is offering $ principal
amount of Smith Barney S&P 500 Equity Linked Notes due , 2002 (the
"Securities"). Each $ principal amount of Securities will be deemed a "Unit"
for purposes of trading and transfer. Units will be transferable by the
Depositary (as defined below), as more fully described below.
The Securities are debt securities of the Company, which are being issued in
denominations of $ and integral multiples thereof, will bear no periodic
payments of interest and will mature on , 2002. At maturity, a holder of
a Security will be entitled to receive, with respect to each Security, the
principal amount thereof plus an interest payment, if any (the "Supplemental
Redemption Amount"), based on the percentage increase, if any, in the S&P 500
Composite Stock Price Index (the "Index") over the Starting Index Value (as
defined below). The Supplemental Redemption Amount will in no event be less than
zero. The Securities are not redeemable or callable by the Company prior to
maturity. At maturity, a holder of a Security will receive the principal amount
of such Security plus the Supplemental Redemption Amount, if any; however, there
will be no other payment of interest, periodic or otherwise.
The Supplemental Redemption Amount payable with respect to a Security at
maturity will equal the product of (A) the principal amount of the applicable
Security, (B) the percentage increase from the Starting Index Value to the
Ending Index Value (as defined below), and (C) %. The Starting Index Value
equals which was the closing value of the Index on the date the Securities
were priced by the Company for initial sale to the public (the "Pricing Date").
The Ending Index Value, as more particularly described herein, will be the
average (arithmetic mean) of the closing values of the Index on certain days,
or, if certain events occur, the closing value of the Index on a single day
prior to the maturity of the Securities. See "Description of Securities--Payment
at Maturity" in this Prospectus Supplement.
SEE "RISK FACTORS" BEGINNING ON PAGE S-6 OF THIS PROSPECTUS SUPPLEMENT FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE
PURCHASERS.
FOR INFORMATION AS TO THE CALCULATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
TO BE PAID AT MATURITY, THE CALCULATION AND THE COMPOSITION OF THE INDEX AND
CERTAIN TAX CONSEQUENCES TO HOLDERS OF THE SECURITIES, SEE "DESCRIPTION OF
SECURITIES," "THE INDEX" AND "CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS," RESPECTIVELY, IN THIS PROSPECTUS SUPPLEMENT.
Ownership of the Securities will be maintained in book-entry form by or
through The Depository Trust Company ("DTC" or the "Depositary"). Holders of the
Securities will not have the right to receive physical certificates evidencing
their ownership except under the limited circumstances described herein. See
"Description of Securities--Global Securities" in this Prospectus Supplement.
The Company intends to apply for listing of the Securities on the Chicago
Board Options Exchange, Inc. (the "CBOE").
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
Price to Underwriting Proceeds to
Public Discount (1) Company (2)
Per Unit $ $ $
Total $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities under the Securities Act of 1933, as amended.
(2) Before deduction of expenses payable by the Company.
----------------
The Securities are offered by the Underwriter named herein, subject to prior
sale, when, as, and if accepted by the Underwriter and subject to certain
conditions. The Underwriter reserves the right to reject orders in whole or in
part. It is expected that delivery of the Securities in book-entry form will be
made through the facilities of DTC in New York, New York on or about ,
1997.
This Prospectus Supplement and the accompanying Prospectus may be used by
the Underwriter in connection with offers and sales of the Securities in
market-making transactions at negotiated prices related to prevailing market
prices at the time of sale. The Underwriter may act as principal or agent in
such transactions.
----------------
Smith Barney Inc.
, 1997
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE
CBOE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
------------------------
FOR NORTH CAROLINA PURCHASERS: These securities have not been approved or
disapproved by the Commissioner of Insurance for the State of North Carolina,
nor has the Commissioner ruled upon the accuracy or adequacy of this Prospectus.
S-2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN
ITS ENTIRETY BY THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS.
<TABLE>
<CAPTION>
<S> <C>
ISSUER............................... Smith Barney Holdings Inc.
SECURITIES OFFERED................... Units of Smith Barney S&P 500 Equity Linked Notes due , 2002. The
Securities are to be issued as a series of Debt Securities under the
Indenture described herein. See "Description of Securities" in this
Prospectus Supplement and in the accompanying Prospectus.
LISTING.............................. The Company intends to apply for listing of the Securities on the CBOE.
DENOMINATIONS........................ A Unit consisting of $ principal amount of Securities and integral
multiples thereof.
MATURITY............................. , 2002.
PAYMENT AT MATURITY.................. At maturity, a holder of a Security will be entitled to receive (i) the
principal amount thereof ($ for each Unit), and (ii) the Supplemental
Redemption Amount equal to:
</TABLE>
<TABLE>
<S> <C> <C>
Principal Amount X Ending Index Value-Starting Index Value X %
---------------------------------------
Starting Index Value
</TABLE>
<TABLE>
<S> <C>
provided, however, that in no event will the Supplemental
Redemption Amount be less than zero. The Starting Index
Value equals , which was the closing value of the
Index (the "Index Value") on the Pricing Date. The Ending
Index Value will equal the average (arithmetic mean) of the
Index Values on certain days prior to the maturity of the
Securities, or, if a Market Disruption Event (as defined
below) occurs, then the Ending Index Value will equal the
Index Value on a single day. See "Description of Securities"
and "The Index" in this Prospectus Supplement.
INDEX......................... The Index is published by Standard & Poor's ("S&P") and is
intended to provide an indication of the pattern of common
stock price movement. The calculation of the value of the
Index is based on the relative value of the aggregate market
value of the common stocks of 500 companies at a particular
time as compared to the aggregate average market value of
the common stocks of 500 similar companies during the base
period from the years 1941 through 1943. S&P may from time
to time, in its sole discretion, add companies to, or delete
companies from, the Index to fulfill the above-stated
intention of providing an indication of common stock price
movement. "Standard & Poor's-Registered Trademark-,"
"S&P-Registered Trademark-," "S&P
500-Registered Trademark-," and "Standard & Poor's
500-Registered Trademark-" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by the
Company. See "The Index" in this Prospectus Supplement.
</TABLE>
S-3
<PAGE>
<TABLE>
<S> <C>
RISK FACTORS.................. Prospective investors should be aware that the Securities
are subject to certain special considerations. Investors
should be aware that if the Ending Index Value does not
exceed the Starting Index Value, holders of the Securities
will receive only the principal amount thereof at maturity,
even if the value of the Index at some point between the
issue date and the maturity date of the Securities exceeded
the Starting Index Value. A holder of the Securities may
receive no Supplemental Redemption Amount at maturity or a
Supplemental Redemption Amount which is below what the
Company would pay as interest as of the date hereof if the
Company issued non-callable senior debt securities with a
similar maturity as that of the Securities. The return of
principal of the Securities at maturity and the payment of
the Supplemental Redemption Amount may not reflect the full
opportunity costs implied by inflation or other factors
relating to the time value of money and will not produce the
same yield as if the stocks underlying the Index were
purchased and held for the same period as the Securities.
The Index does not reflect the payment of dividends on the
stocks underlying it and, therefore, the yield to the
maturity of the Securities will not produce the same yield
as if such underlying stocks were purchased and held for a
similar period.
There can be no assurance as to whether there will be a
secondary market in the Securities, that the Underwriter
will make a secondary market in the Securities, or, if there
were to be such a secondary market, whether such market
would be liquid or illiquid. It is expected that any
secondary market for the Securities will be affected by the
creditworthiness of the Company and by a number of other
factors, including, but not limited to, the level of the
Index, the volatility of the Index, dividend rates on the
stocks underlying the Index, the time remaining to the
maturity of the Securities and market interest rates. The
value of the Securities prior to maturity is expected to
depend on market factors which include, but may not be
limited to, those factors listed above. If, however, the
Securities are sold prior to the maturity date, the sale
price may be at a substantial discount from the amount
expected to be payable to the holder upon the maturity of
the Securities as a result of, but not limited to, the
factors mentioned above. The price at which a holder will be
able to sell the Securities prior to maturity may be at a
discount, which could be substantial, from the principal
amount thereof. The value of the Securities may not
necessarily bear a direct relationship to the value of the
Index. In addition, the Ending Index Value depends on a
number of interrelated factors, including economic,
financial and political events, over which the Company has
no control.
Trading prices of the stocks underlying the 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
</TABLE>
S-4
<PAGE>
<TABLE>
<S> <C>
underlying stocks in a specific market segment or a
particular underlying stock.
It is suggested that prospective investors who consider
purchasing the Securities should reach an investment
decision only after carefully considering the suitability of
the Securities in light of their particular circumstances.
See "Risk Factors" in this Prospectus Supplement.
Investors should also consider the tax consequences of
investing in the Securities. See "Certain United States
Federal Income Tax Considerations" in this Prospectus
Supplement.
</TABLE>
S-5
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS, THE FOLLOWING RISK FACTORS RELATING TO THE SECURITIES.
PAYMENT AT MATURITY
SUPPLEMENTAL REDEMPTION AMOUNT MAY BE ZERO. Investors should be aware that
if the Ending Index Value does not exceed the Starting Index Value, holders of
the Securities will receive only the principal amount thereof at maturity, even
if the value of the Index at some point between the Pricing Date and the
maturity date of the Securities exceeded the Starting Index Value.
YIELD MAY BE BELOW MARKET INTEREST RATES ON THE PRICING DATE. A holder of
the Securities may receive no Supplemental Redemption Amount at maturity, or a
Supplemental Redemption Amount that is below what the Company would pay as
interest as of the Pricing Date if the Company issued non-callable senior debt
securities with a similar maturity as that of the Securities. The return of
principal of the Securities at maturity and the payment of the Supplemental
Redemption Amount, if any, may not reflect the full opportunity costs implied by
inflation or other factors relating to the time value of money.
YIELD ON SECURITIES WILL NOT REFLECT DIVIDENDS. The Index does not reflect
the payment of dividends on the stocks underlying it and therefore the yield
based on the Index to the maturity of the Securities will not produce the same
yield as if such underlying stocks were purchased and held for a similar period.
See "Description of Securities" below.
POSSIBLE ILLIQUIDITY OF THE SECONDARY MARKET; VOLATILITY
The Company intends to apply for listing of the Securities on the CBOE.
However, there can be no assurance as to whether there will be a secondary
market in the Securities, that the Underwriter will make a secondary market in
the Securities, or, if there were to be such a secondary market, whether such
market would be liquid or illiquid.
It is expected that any secondary market for the Securities will be affected
by the creditworthiness of the Company and by a number of factors, including,
but not limited to, the level of the Index, the volatility of the Index,
dividend rates on the stocks underlying the Index, the time remaining to the
maturity of the Securities and market interest rates. The value of the
Securities prior to maturity is expected to depend on market factors which
include, but may not be limited to, those factors listed above. If, however, the
Securities are sold prior to the maturity date, the sale price may be at a
substantial discount from the amount expected to be payable to the holder upon
the maturity of the Securities as a result of, but not limited to, the factors
mentioned above. The price at which a holder will be able to sell the Securities
prior to maturity may be at a discount, which could be substantial, from the
principal amount thereof. The value of the Securities may not necessarily bear a
direct relationship to the value of the Index. In addition, the Ending Index
Value depends on a number of interrelated factors, including economic, financial
and political events, over which the Company has no control. See "Description of
Securities" and "The Index" below.
RELATIONSHIP OF THE SECURITIES AND THE INDEX
The historical Index values should not be taken as an indication of the
future performance of the Index during the term of the Securities. While the
trading prices of the stocks underlying the Index will determine the value of
the Index, it is impossible to predict whether the value of the Index will fall
or rise. Moreover, the value of the Securities may not necessarily bear a direct
relationship to the value of the Index. Trading prices of the stocks underlying
the 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
S-6
<PAGE>
that can influence the values of the underlying stocks in a specific market
segment or a particular underlying stock.
The policies of S&P concerning additions, deletions and substitutions of the
stocks underlying the Index and the manner in which S&P takes account of certain
changes affecting such underlying stocks may affect the value of the Index. The
policies of S&P with respect to the calculation of the Index could also affect
the value of the Index. S&P may discontinue or suspend calculation or
dissemination of the Index. Any such actions could affect the value of the
Securities. See "The Index" and "Description of Securities-- Discontinuance of
the Index" and "--Adjustments to the Index; Market Disruption Events" below.
AFFILIATION OF THE COMPANY AND CALCULATION AGENT
Smith Barney Inc., a wholly owned subsidiary of the Company ("Smith
Barney"), the Company or their affiliates may from time to time engage in
transactions involving the stocks underlying the Index for their proprietary
accounts and for other accounts under their management. Smith Barney and its
affiliates will also be the counterparties to the hedge of the Company's
obligations under the Securities. See "Use of Proceeds and Hedging" below. As a
result of the foregoing, as well as its affiliation with the Company, potential
conflicts of interest may exist between Smith Barney, in its capacity as the
calculation agent (or any successor thereto, the "Calculation Agent"), and the
holders of the Securities, including with respect to certain determinations and
judgments that the Calculation Agent must make in determining the Index Values
or whether a Market Disruption Event has occurred. See "Description of
Securities--Discontinuance of the Index" and "--Adjustments to the Index; Market
Disruption Events" below. Smith Barney, as a registered broker-dealer, is
required to maintain policies and procedures regarding the handling and use of
confidential proprietary information, and such policies and procedures will be
in effect throughout the term of the Securities 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 the dissemination of such Index Values.
Smith Barney is obligated to carry out its duties and functions as Calculation
Agent in good faith and using its reasonable judgment.
OTHER CONSIDERATIONS
If a case under the United States bankruptcy code is commenced in respect of
the Company, the claim of a holder of the Securities may, under Title 11 of the
United States Code, be limited to the principal amount of such Securities.
It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully considering
the suitability of the Securities in light of their particular circumstances.
Investors should also consider the tax consequences of investing in the
Securities. See "Certain United States Federal Income Tax Consequences" below.
S-7
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 31, 1996, and as adjusted to give effect to the issuance and
sale of the Securities, and the application of the proceeds therefrom to the
repayment of short-term borrowings, as if such transactions had occurred on
December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
------------------------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
OUTSTANDING AS ADJUSTED
----------- -----------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Short-term borrowings.................................................................. $ 3,217 $ []
Notes payable.......................................................................... 10 10
Long-term debt......................................................................... 2,369 []
Subordinated indebtedness.............................................................. 226 226
----------- -----------
Total debt..................................................................... $ 5,822 $ 5,822
----------- -----------
----------- -----------
Stockholder's equity
Common stock ($.10 par value;
authorized--1,000 shares;
issued and outstanding--100 shares)................................................ -- --
Additional paid-in capital............................................................. 1,803 1,803
Retained earnings...................................................................... 951 951
Cumulative translation adjustment...................................................... 4 4
----------- -----------
Total stockholder's equity..................................................... 2,758 2,758
----------- -----------
Total capitalization................................................................... $ 8,580 $ 8,580
----------- -----------
----------- -----------
</TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------------
1996 1995 1994 1993 1992
----------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges............................ 1.95 1.71 1.81 2.68 2.06
<CAPTION>
1991
---------
<S> <C>
Ratio of earnings to fixed charges............................ 1.69
</TABLE>
The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes and fixed charges by the fixed charges. For
purposes of this ratio, fixed charges consist of interest expense and that
portion of rentals deemed representative of the appropriate interest factor.
S-8
<PAGE>
DESCRIPTION OF SECURITIES
THE FOLLOWING DESCRIPTION OF THE TERMS OF THE SECURITIES OFFERED HEREIN
(REFERRED TO IN THE PROSPECTUS AS THE "OFFERED SECURITIES") SUPPLEMENTS THE
DESCRIPTION OF THE GENERAL TERMS OF SECURITIES SET FORTH IN THE PROSPECTUS, TO
WHICH DESCRIPTION REFERENCE IS HEREBY MADE. THE FOLLOWING SUMMARY OF THE
SECURITIES IS QUALIFIED IN ITS ENTIRETY BY REFERENCE THERETO AND TO THE
INDENTURE REFERRED TO THEREIN.
GENERAL
The Securities are a series of debt securities issued under the Indenture
described in the accompanying Prospectus. The aggregate number of Units issued
will be limited to . The Securities will mature on , 2002
and will be general unsecured obligations of the Company. The Securities will be
issued only in fully registered form and in denominations of integral multiples
of one Unit. Initially the Securities will be issued in the form of one or more
global securities (each, a "Global Security") registered in the name of DTC or
its nominee, as described below. The Securities will not be subject to
redemption prior to maturity.
Reference should be made to the accompanying Prospectus for a detailed
summary of additional provisions of the Securities and of the Indenture under
which the Securities will be issued. For a discussion of certain federal income
tax consequences to Holders of the Securities, see "Certain United States
Federal Income Tax Consequences below."
INTEREST
Holders of the Securities will not be entitled to receive periodic payments
of interest.
PAYMENT AT MATURITY
At maturity, a Holder of a Security will be entitled to receive the
principal amount thereof plus a Supplemental Redemption Amount, if any, all as
provided below. If the Ending Index Value does not exceed the Starting Index
Value, a Holder of a Security will be entitled to receive only the principal
amount thereof.
At maturity, a Holder of a Security will be entitled to receive, with
respect to each such Security, (i) the principal amount thereof ($ for each
Unit) and (ii) the Supplemental Redemption Amount equal in amount to:
Principal Amount X Ending Index Value - Starting Index Value X %
-----------------------------------------
Starting Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero. The Starting Index Value equals , which was the Index Value
on the Pricing Date. The Ending Index Value will be determined by the
Calculation Agent and will equal the average (arithmetic mean) of the Index
Values determined on each of the first five Calculation Days (as defined below)
during the Calculation Period (as defined below). If there are fewer than five
Calculation Days, then the Ending Index Value will equal the average (arithmetic
mean) of the Index Values on such Calculation Days, and if there is only one
Calculation Day, then the Ending Index Value will equal the Index Value on such
Calculation Day. If no Calculation Days occur during the Calculation Period
because of Market Disruption Events, then the Ending Index Value will equal the
Index Value determined on the last scheduled Index Business Day (as defined
below) in the Calculation Period, regardless of the occurrences of a Market
Disruption Event on such day. The "Calculation Period" means the period from and
including the seventh scheduled Index Business Day prior to the maturity date to
and including the second scheduled Index Business Day prior to the maturity
date. "Calculation Day" means any Index Business Day during the
S-9
<PAGE>
Calculation Period on which a Market Disruption Event has not occurred. For
purposes of determining the Ending Index Value, an "Index Business Day" is a day
on which the New York Stock Exchange and the American Stock Exchange are open
for trading and the Index or any Successor Index (as defined below) is
calculated and published. All determinations made by the Calculation Agent shall
be at the sole discretion of the Calculation Agent and, absent manifest error by
the Calculation Agent, shall be conclusive for all purposes and binding on the
Company and holders of the Securities.
The following table illustrates, for a range of hypothetical Ending Index
Values, (i) the total amount payable at maturity for each $15 principal amount
of Securities, (ii) the total rate of return to holders of the Securities
assuming a 105% participation rate, (iii) the pretax annualized rate of return
to holders of Securities, and (iv) the pretax annualized rate of return of an
investment in the stocks underlying the Index (which includes an assumed
aggregate dividend yield of 1.81% per annum, as more fully described below).
<TABLE>
<CAPTION>
PRETAX
ANNUALIZED RATE
TOTAL RATE PRETAX OF RETURN ON
HYPOTHETICAL TOTAL AMOUNT OF ANNUALIZED RATE STOCKS
PERCENTAGE CHANGE ENDING PAYABLE AT MATURITY RETURN ON OF RETURN ON UNDERLYING
OF INDEX VALUE INDEX VALUE PER $15.00 PRINCIPAL THE NOTES THE NOTES(1) THE NOTES(1)(2)
- ------------------ ------------------ --------------------- ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C>
-50.0% 401.39 $ 15.00 0.00% 0.00% -11.56%
-40.0% 481.66 $ 15.00 0.00% 0.00% -8.15%
-30.0% 561.94 $ 15.00 0.00% 0.00% -5.20%
-20.0% 642.22 $ 15.00 0.00% 0.00% -2.61%
-10.0% 722.49 $ 15.00 0.00% 0.00% -0.29%
0.0% 802.77(3) $ 15.00 0.00% 0.00% 1.81%
10.0% 883.05 $ 16.58 10.50% 2.01% 3.74%
20.0% 963.32 $ 18.15 21.00% 3.85% 5.51%
30.0% 1043.60 $ 19.73 31.50% 5.55% 7.16%
40.0% 1123.88 $ 21.30 42.00% 7.13% 8.70%
50.0% 1204.16 $ 22.88 52.50% 8.62% 10.15%
60.0% 1284.43 $ 24.45 63.00% 10.01% 11.51%
70.0% 1364.71 $ 26.03 73.50% 11.32% 12.80%
80.0% 1444.99 $ 27.60 84.00% 12.57% 14.02%
90.0% 1525.26 $ 29.18 94.50% 13.75% 15.19%
100.0% 1605.54 $ 30.75 105.00% 14.88% 16.30%
110.0% 1685.82 $ 32.33 115.50% 15.95% 17.36%
120.0% 1766.09 $ 33.90 126.00% 16.98% 18.38%
</TABLE>
- ------------------------
(1) The annualized rates of return specified in this table are calculated on a
semiannual bond equivalent basis.
(2) This rate of return assumes (i) an investment of a fixed amount in the
stocks underlying the Index with the allocation of such amount reflecting
the relative weight of such stocks in the Index; (ii) a percentage change in
the aggregate price of such stocks that equals the percentage change in the
Index from the Starting Index Value to the applicable hypothetical Ending
Index Value; (iii) a constant dividend yield of 1.81% per annum, paid
quarterly from the date of initial delivery of Securities, applied to the
value of the Index at the beginning of such quarter assuming such value
increases or decreases linearly from the Starting Index Value to the
applicable hypothetical Ending Index Value; (iv) no transaction fees or
expenses; (v) a term for the notes from 02/12/97 to 02/12/02 and (vi) a
final Index Value equal to the hypothetical Ending Index Value.
S-10
<PAGE>
(3) The Starting Index Value. For purposes of this preliminary prospectus, the
Starting Index Value is assumed to be the Index Value on February 12, 1997.
The actual Starting Index Value will be the Index Value on the Pricing Date.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount (if any) received by investors and the total and
pretax annualized rate of return resulting therefrom will depend entirely on the
actual Ending Index Value determined by the Calculation Agent as provided
herein. Historical data regarding the Index is included in this Prospectus
Supplement under "The Index-- Historical Data on the Index."
DISCONTINUANCE OF THE INDEX
If S&P discontinues publication of the Index and S&P 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 relevant Index Value
shall be determined by reference to the value of such Successor Index at the
close of trading on the relevant exchange or market for the Successor Index on
the applicable Calculation Day.
Upon any selection by the Calculation Agent of a Successor Index, the
Calculation Agent shall cause written notice thereof to be furnished to the
Trustee, to the Company and to the Holders of the Securities within three
Business Days of such selection.
If S&P discontinues publication of the Index prior to, and such
discontinuance is continuing on, any Calculation Day and the Calculation Agent
determines that no Successor Index is available at such time, then on such
Calculation Day, the Calculation Agent shall determine the Index Value on such
Calculation Day. The Index Value shall be computed by the Calculation Agent in
accordance with the formula for and method of calculating the Index last in
effect prior to such discontinuance, using the closing price (or, if trading in
the relevant securities has been materially suspended or materially limited, its
good faith estimate of the closing price that would have prevailed but for such
suspension or limitation) on such Calculation Day of each security most recently
comprising the Index. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Index may adversely affect the value of
the Securities. If a Successor Index is selected or the Calculation Agent
calculates a value as a substitute for the Index as described below, such
Successor Index or value shall be substituted for the Index for all purposes,
including for purposes of determining whether a Market Disruption Event exists.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS
If at any time the method of calculating the Index or a Successor Index, or
the value thereof, is changed in any material respect, or if the Index or a
Successor Index is in any other way modified so that such index does not, in the
opinion of the Calculation Agent, fairly represent the value of the Index or
such Successor Index had such changes or modifications not been made, then, from
and after such time, the Calculation Agent shall, at the close of business in
New York, New York, on each Calculation Day, make such calculations and
adjustments as, in the good faith judgment of the Calculation Agent, may be
necessary in order to arrive at a value of a stock index comparable to the Index
as if such changes or modifications had not been made, and calculate the Index
Value with reference to the Index or such Successor Index, as adjusted.
Accordingly, if the method of calculating the Index or a Successor Index is
modified so that the value of such 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 the index),
then the Calculation Agent shall adjust such index in order to arrive at a value
of the Index or such Successor Index as if it had not been modified (E.G., as if
such split had not occurred).
"Market Disruption Event" means either of the following events, as
determined by the Calculation Agent:
S-11
<PAGE>
(i) the suspension or material limitation (limitations pursuant to New
York Stock Exchange Rule 80A (or any applicable rule or regulation enacted
or promulgated by the New York Stock Exchange or any other self-regulatory
organization or the Securities and Exchange Commission of similar scope as
determined by the Calculation Agent) on trading during significant market
fluctuations shall be considered "material" for purposes of this
definition), in each case, for more than two hours of trading, in 100 or
more of the securities included in the Index, or
(ii) the suspension or material limitation, in each case, for more than
two hours of trading (whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise) in (A)
futures contracts related to the Index which are traded on the Chicago
Mercantile Exchange or (B) option contracts related to the Index which are
traded on the CBOE.
For the purposes of this definition, a limitation on the hours in a trading day
and/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.
REDEMPTION; DEFEASANCE
The Securities are not subject to redemption prior to maturity and are not
subject to the defeasance provisions described in the accompanying Prospectus
under "Description of Securities--Defeasance."
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a beneficial owner of a
Security upon any acceleration permitted by the Securities, with respect to each
$ principal amount thereof, will be equal to: (i) the initial issue price
($ ) plus (ii) a Supplemental Redemption Amount calculated as though the date
of early repayment were the maturity date of the Securities. See "Description of
Securities--Payment at Maturity" below. If a case under the United States
bankruptcy code is commenced in respect of the Company, the claim of the holder
of a Security may be limited, under Title 11 of the United States Code, to the
principal amount of the Security.
In case of default in payment at the maturity date of the Securities
(whether at their stated maturity or upon acceleration), from and after the
maturity date, the Securities shall bear interest, payable upon demand of the
Trustee, at the rate of % per annum (to the extent that payment of such
interest shall be legally enforceable) on the unpaid amount due and payable on
such date in accordance with the terms of the Securities to the date payment of
such amount is made or duly provided for.
GLOBAL SECURITIES
Upon issuance, all Securities will be represented by one or more fully
registered Global Securities. Each such Global Security will be deposited with,
or on behalf of, DTC and registered in the name of DTC or a nominee thereof.
Unless and until it is exchanged in whole or in part for Securities in
definitive form, no Global Security may be transferred except as a whole by the
Depositary to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or by such Depositary or
any such nominee to a successor of such Depositary or a nominee of such
successor.
Payment of the principal of, and any Supplemental Redemption Amount with
respect to, Securities registered in the name of DTC or its nominee will be made
to DTC or its nominee, as the case may be, as the Holder of the Global
Securities representing such Securities. None of the Company, the Trustee or any
other agent of the Company or agent of the Trustee will have any responsibility
or liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests or for supervising or reviewing any
records relating to such beneficial ownership interests. The Company expects
that DTC, upon receipt of any payment of principal or any Supplemental
Redemption Amount in respect of a Global
S-12
<PAGE>
Security, will credit the accounts of the relevant participants with payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interest in such Global Security as shown on the records of DTC. The
Company also expects that payments by participants to owners of beneficial
interests in Global Securities will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
If (x) DTC is at any time unwilling or unable to continue as depositary and
a successor depositary is not appointed by the Company within 90 days, (y) the
Company executes and delivers to the Trustee a Company Order to the effect that
the Global Securities shall be exchangeable or (z) an Event of Default has
occurred and is continuing with respect to the Securities, the Global Securities
will be exchangeable for Securities in definitive certificated form of like
tenor and of an equal aggregate principal amount, in denominations of $ and
integral multiples thereof. Such definitive Securities shall be registered in
such name or names as the Depositary shall instruct the Trustee. It is expected
that such instructions may be based upon directions received by the Depositary
from participants with respect to ownership of beneficial interests in such
Global Securities.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Securities will be made by the Underwriter in immediately
available funds. All payments of principal and the Supplemental Redemption
Amount, if any, will be made by the Company in immediately available funds so
long as the Securities are maintained in book-entry form.
THE INDEX
All disclosure contained in this Prospectus Supplement regarding the Index,
including, without limitation, its make-up, method of calculation and changes in
its components, is derived from publicly available information prepared by S&P.
Neither the Company nor the Underwriter takes any responsibility for the
accuracy or completeness of such information.
GENERAL
The Index is published by S&P and is intended to provide a performance
benchmark for the U.S. equity markets. The calculation of the value of the Index
(discussed below in further detail) is based on the relative value of the
aggregate Market Value (as defined below) of the common stocks of 500 companies
(the "Component Stocks") as of a particular time as compared to the aggregate
average Market Value of the common stocks of 500 similar companies during the
base period of the years 1941 through 1943. The "Market Value" of any Component
Stock is the product of the market price per share and the number of the then
outstanding shares of such Component Stock. The 500 companies are not the 500
largest companies listed on the New York Stock Exchange and not all 500
companies are listed on such exchange. S&P chooses companies for inclusion in
the Index with an aim of achieving a distribution by broad industry groupings
that approximates the distribution of these groupings in the common stock
population of the U.S. equity market. Relevant criteria employed by S&P include
the viability of the particular company, the extent to which that company
represents the industry group to which it is assigned, the extent to which the
market price of that company's common stock is generally responsive to changes
in the affairs of the respective industry and the Market Value and trading
activity of the common stock of that company. As of January 30, 1997, the 500
companies included in the Index were divided into 105 individual groups and 11
economic sectors. Financials, Utilities, and Transportation account for 3 of the
11 sectors. The Industrials are broken into 8 sectors -- Basic Materials,
Capital Goods, Communication Services, Consumer Cyclicals, Consumer Staples,
Energy, Health Care and Technology. S&P may from time to time, in its sole
discretion, add companies to, or delete companies from, the Index to achieve the
objectives stated above.
S-13
<PAGE>
COMPUTATION OF THE S&P 500 INDEX
S&P currently computes the Index as of a particular time as follows:
(1) the Market Value of each Component Stock is determined as of such
time;
(2) the Market Value of all Component Stocks as of such time are
aggregated;
(3) the mean average of the Market Values as of each week in the base
period of the years 1941 through 1943 of the common stock of each company in
a group of 500 substantially similar companies is determined;
(4) the mean average Market Values of all such common stocks over such
base period (as determined under clause (3) above) are aggregated (such
aggregate amount being referred to as the "Base Value");
(5) the aggregate Market Value of all Component Stocks as of such time
as determined under clause (2) above) is divided by the Base Value; and
(6) the resulting quotient (expressed in decimals) is multiplied by ten.
While S&P currently employs the above methodology to calculate the Index, no
assurance can be given that S&P will not modify or change such methodology in a
manner that may affect the Supplemental Redemption Amount, if any, payable to
holders of Securities upon maturity or otherwise.
S&P adjusts the foregoing formula to negate the effect of changes in the
Market Value of a component stock that are determined by S&P to be arbitrary or
not due to true market fluctuations. Such changes may result from such causes as
the issuance of stock dividends, the granting to shareholders of rights to
purchase additional shares of such stock, the purchase thereof by employees
pursuant to employee benefit plans, certain consolidations and acquisitions, the
granting to shareholders of rights to purchase other securities of the company,
the substitution by S&P of particular component stocks in the Index, and other
reasons. In all such cases, S&P first recalculates the aggregate Market Value of
all component stocks (after taking account of the new market price per share of
the particular component stock or the new number of outstanding shares thereof
or both, as the case may be) and then determines the New Base Value in
accordance with the following formula:
New Market Value
------------------
Old Base Value X Old Market Value = New Base Value
The result is that the Base Value is adjusted in proportion to any change in
the aggregate Market Value of all Component Stocks resulting from the causes
referred to above to the extent necessary to negate the effects of such causes
upon the Index.
S-14
<PAGE>
HISTORICAL DATA ON THE INDEX
The following table sets forth the closing values of the Index on the last
business day of each year from 1947 through 1988, as published by S&P. The
historical experience of the Index should not be taken as an indication of
future performance and no assurance can be given that the value of the Index
will not decline and thereby reduce the Supplemental Redemption Amount that may
be payable to holders of Securities at maturity or otherwise.
<TABLE>
<CAPTION>
YEAR-END VALUE OF THE INDEX
- ----------------------------------------------------
YEAR CLOSING VALUE YEAR CLOSING VALUE
- --------- --------------- --------- -------------
<S> <C> <C> <C>
1947 15.30 1968 103.86
1948 15.20 1969 92.06
1949 16.79 1970 92.15
1950 20.43 1971 102.09
1951 23.77 1972 118.05
1952 26.57 1973 97.55
1953 24.81 1974 68.56
1954 35.98 1975 90.19
1955 45.48 1976 107.46
1956 46.67 1977 95.10
1957 39.99 1978 96.11
1958 55.21 1979 107.94
1959 59.89 1980 135.76
1960 58.11 1981 122.55
1961 71.55 1982 140.64
1962 63.10 1983 164.93
1963 75.02 1984 167.24
1964 84.75 1985 211.28
1965 92.43 1986 242.17
1966 80.33 1987 247.08
1967 96.47 1988 277.72
</TABLE>
S-15
<PAGE>
The following table sets forth the level of the Index at the end of each
month, in the period from January, 1989 through January, 1997. These historical
data on the Index are not necessarily indicative of the future performance of
the Index or what the value of the Securities may be. Any historical upward or
downward trend in the level 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 Securities.
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
1989:
January........................................................... 297.47
February.......................................................... 288.86
March............................................................. 294.87
April............................................................. 309.64
May............................................................... 320.52
June.............................................................. 317.98
July.............................................................. 346.08
August............................................................ 351.45
September......................................................... 349.15
October........................................................... 340.36
November.......................................................... 345.99
December.......................................................... 353.40
1990:
January........................................................... 329.08
February.......................................................... 331.89
March............................................................. 339.94
April............................................................. 330.80
May............................................................... 361.23
June.............................................................. 358.02
July.............................................................. 356.15
August............................................................ 322.56
September......................................................... 306.05
October........................................................... 304.00
November.......................................................... 322.22
December.......................................................... 330.22
</TABLE>
S-16
<PAGE>
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
1991:
<S> <C>
January........................................................... 343.93
February.......................................................... 367.07
March............................................................. 375.22
April............................................................. 375.35
May............................................................... 389.83
June.............................................................. 371.16
July.............................................................. 387.81
August............................................................ 395.43
September......................................................... 387.86
October........................................................... 392.46
November.......................................................... 375.22
December.......................................................... 417.09
1992:
January........................................................... 408.79
February.......................................................... 412.70
March............................................................. 403.69
April............................................................. 414.95
May............................................................... 415.35
June.............................................................. 408.14
July.............................................................. 424.21
August............................................................ 414.03
September......................................................... 417.80
October........................................................... 418.68
November.......................................................... 431.35
December.......................................................... 435.71
1993:
January........................................................... 438.78
February.......................................................... 443.38
March............................................................. 451.67
April............................................................. 440.19
May............................................................... 450.19
June.............................................................. 450.53
July.............................................................. 448.13
August............................................................ 463.56
September......................................................... 458.93
October........................................................... 467.83
November.......................................................... 461.79
December.......................................................... 466.45
</TABLE>
S-17
<PAGE>
<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
1994:
<S> <C>
January........................................................... 481.61
February.......................................................... 467.14
March............................................................. 445.77
April............................................................. 450.91
May............................................................... 456.50
June.............................................................. 444.27
July.............................................................. 458.26
August............................................................ 475.49
September......................................................... 462.69
October........................................................... 472.35
November.......................................................... 453.69
December.......................................................... 459.27
1995:
January........................................................... 470.42
February.......................................................... 487.39
March............................................................. 500.71
April............................................................. 514.71
May............................................................... 533.40
June.............................................................. 544.75
July.............................................................. 562.06
August............................................................ 561.88
September......................................................... 584.41
October........................................................... 581.50
November.......................................................... 605.37
December.......................................................... 615.93
1996:
January........................................................... 636.02
February.......................................................... 640.43
March............................................................. 645.50
April............................................................. 654.17
May............................................................... 669.12
June.............................................................. 670.63
July.............................................................. 639.95
August............................................................ 651.99
September......................................................... 687.31
October........................................................... 705.27
November.......................................................... 757.02
December.......................................................... 740.74
1997:
January........................................................... 786.41
</TABLE>
S-18
<PAGE>
The following graph sets forth the historical performance of the Index at
the end of each year from 1947 through 1996. Past movements of the Index are not
necessary indicative of the future Index values. On , 1997 the closing
level of the Index was .
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
YEAR END S&P 500 INDEX
<S> <C>
1947 15.3
1948 15.2
1949 16.76
1950 20.41
1951 23.77
1952 26.75
1953 24.81
1954 35.98
1955 45.88
1956 46.67
1957 39.99
1958 55.21
1959 59.89
1960 58.11
1961 71.55
1962 63.1
1963 75.02
1964 84.75
1965 92.43
1966 80.33
1967 96.47
1968 103.86
1969 92.06
1970 92.15
1971 102.09
1972 118.05
1973 97.55
1974 68.56
1975 90.19
1976 107.46
1977 95.1
1978 96.11
1979 107.94
1980 135.76
1981 122.55
1982 140.64
1983 164.93
1984 167.24
1985 211.28
1986 242.17
1987 247.08
1988 277.72
1989 353.4
1990 330.22
1991 417.09
1992 435.71
1993 466.45
1994 459.27
1995 615.93
1996 740.74
</TABLE>
LICENSE AGREEMENT
S&P and the Company have entered into a non-exclusive license agreement
providing for the license to the Company and any of its affiliated or subsidiary
companies, in exchange for a fee, of the right to use the Index, which is owned
and published by S&P, in connection with certain securities, including the
Securities.
The license agreement between S&P and the Company provides that the
following language must be stated in this Prospectus Supplement:
"The Securities are not sponsored, endorsed, sold or promoted by S&P. S&P
makes no representation or warranty, express or implied, to the holders of
the Securities or any member of the public regarding the advisability of
investing in securities generally or in the Securities particularly or the
ability of the Index to track general stock market performance. S&P's only
relationship to the Company (other than transactions entered into in the
ordinary course of business) is the licensing of certain trademarks and
trade names of S&P and of the Index which is determined, composed and
calculated by S&P without regard to the Company or the Securities. S&P has
no obligation to take the needs of the Company or the holders of the
Securities into consideration in determining, composing or calculating the
Index. S&P is not responsible for, and has not participated in, the
determination of the timing of the sale of the Securities, prices at which
the Securities are to initially be sold, or quantities of the Securities to
be issued or in the determination or calculation of the equation by which
the Securities are to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading of the
Securities.
S-19
<PAGE>
STANDARD & POOR'S ("S&P") DOES NOT GUARANTEE THE ACCURACY AND/OR THE
COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE COMPANY, SMITH BARNEY,
HOLDERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED UNDER
THE LICENSE AGREEMENT DESCRIBED HEREIN OR FOR ANY OTHER USE. S&P 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 ANY OF THE FOREGOING, IN NO EVENT
SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, the following is
an accurate summary of the principal U.S. (as defined below) federal income tax
considerations that may be relevant to an initial holder of Securities that is a
U.S. person (as defined below). This summary is based on laws, regulations,
rulings and decisions now in effect, all of which are subject to change by
legislative, judicial or regulatory action that in some cases may have
retroactive effect. This summary deals only with U.S. persons that will hold
Securities as capital assets and, except as discussed herein, does not address
tax considerations applicable to investors that may be subject to special tax
rules, such as banks, insurance companies, dealers in securities or currencies,
persons that hold Securities as a part of an integrated investment (including a
"straddle") comprised of Securities and one or more other positions, or persons
that have a functional currency other than the U.S. dollar.
As used herein, the term "U.S. person" means a holder of Securities that is
(i) a citizen or resident of the U.S., (ii) a corporation, partnership or other
entity created or organized in or under the laws of the U.S. or any political
subdivision thereof, (iii) an estate the income of which is subject to U.S.
federal income taxation regardless of its source, (iv) a trust the income of
which is includible in gross income for U.S. federal income tax purposes,
regardless of its source or, for taxable years beginning after December 31, 1996
(and, if a trustee so elects, for taxable years ending after August 20, 1996), a
trust if a U.S. court is able to exercise primary supervision over the
administration of such trust and one or more U.S. fiduciaries have the authority
to control all substantial decisions of such trust or (v) a person otherwise
subject to U.S. federal income taxation on a net basis in respect of such
holder's ownership of the Securities. The term "U.S." means the United States of
America.
Investors should consult their tax advisors in determining the tax
consequences to them of purchasing, holding and disposing of the Securities,
including the application of the U.S. federal income tax considerations
discussed below to their particular situation, as well as the application of
state, local, foreign or other tax laws.
TAX CHARACTERIZATION OF THE SECURITIES
The Company intends to treat the Securities as indebtedness for U.S. federal
income tax purposes. It is possible, however, that the Internal Revenue Service
(the "Service") will disagree with this characterization of the Securities. The
following discussion assumes that the Securities will be treated as indebtedness
for U.S. federal income tax purposes.
TAXATION OF INTEREST ON THE SECURITIES
Under recently issued Treasury regulations applicable to certain debt
instruments issued with "contingent interest" (the "Regulations"), a holder of
Securities will be required to include certain amounts in
S-20
<PAGE>
income as interest before receiving the Supplemental Redemption Amount, if any,
and the principal amount. These amounts will be determined by utilizing
semi-annual compounding, based on the comparable yield set forth in the next
paragraph. Investors should consult their tax advisors with respect to the
computation of the amounts to be included in income.
Under the Regulations, the Company is required to determine the comparable
yield of the Securities and to construct a projected payment schedule for the
Securities. The comparable yield for the Securities is generally the yield
(determined as of the issue date of the Securities) at which the Company would
issue a debt instrument that did not provide for contingent interest payments
and that had terms and conditions similar to the Securities (e.g., the term,
level of subordination, timing of payments and general market conditions). Based
on these and other factors, the Company has determined that the comparable yield
for the Securities is % compounded semi-annually. The projected payment
schedule for the Securities consists of the Company's determination (based on
the comparable yield of the Securities), as of the issue date of the Securities,
of the projected Supplemental Redemption Amount payable at the maturity of the
Securities. Based on the foregoing, the Company has determined that a projected
Supplemental Redemption Amount of $ per Unit will be made on the maturity
date of the Securities. The projected payment schedule has been determined
solely for U.S. federal income tax purposes (i.e., for the purpose of complying
with the Regulations) and is utilized to determine the amount of interest to be
included in income annually by the holders. Accordingly, the calculation of the
projected payment schedule and the comparable yield is based upon a number of
assumptions and estimates and is not a prediction of the actual amount, if any,
which may be paid to holders of Securities at maturity or of the actual yield on
the Securities.
A holder of Securities will generally be bound by the Company's projected
payment schedule unless the holder determines its own projected payment schedule
and comparable yield, explicitly discloses such schedule to the Service, and
explains to the Service the reason for preparing its own schedule. The Company
believes that the projected payment schedule and comparable yield set forth
above are reasonable and will therefore be respected by the Service. The
Company's determination, however, is not binding on the Service, and it is
possible that the Service could conclude that some other projected payment
schedule or comparable yield should be used for the Securities.
If the actual Supplemental Redemption Amount differs from the Company's
projected Supplemental Redemption Amount, the difference will result in either a
positive or a negative adjustment to the amount includible in a holder's income
as interest on the Securities. If the actual Supplemental Redemption Amount
exceeds the Company's projected Supplemental Redemption Amount, the excess will
be treated as additional interest income for the taxable year in which the
Supplemental Redemption Amount is received. If the Company's projected
Supplemental Redemption Amount exceeds the actual Supplemental Redemption
Amount, the excess will (i) first offset the interest income that would
otherwise be includible in a holder's income with respect to the Securities for
the taxable year in which the Supplemental Redemption Amount is received and
(ii) then be treated as an ordinary loss by the holder for such taxable year.
INVESTOR ACCRUAL FOR TAX PURPOSES
Based upon the comparable yield of % described above, the Supplemental
Redemption Amount is projected to equal $[ ] per Unit. Using the projected
Supplemental Redemption Amount, interest to be accrued by a holder for each Unit
would be as follows:
<TABLE>
<CAPTION>
TOTAL INTEREST DEEMED
TO HAVE ACCRUED ON
INTEREST DEEMED TO SECURITIES AS OF END
ACCRUE DURING ACCRUAL OF ACCRUAL PERIOD
ACCRUAL PERIOD PERIOD (PER UNIT) (PER UNIT)
- ------------------------ --------------------- ---------------------
<S> <C> <C>
[ ] [ ] [ ]
</TABLE>
S-21
<PAGE>
DISPOSITION OF SECURITIES
If a holder of Securities sells or exchanges Securities in a taxable
transaction before the maturity or acceleration of the Securities (a
"disposition"), such holder will recognize gain or loss equal to the difference
between the amount realized on the disposition and the holder's adjusted tax
basis in the Securities. A holder's adjusted tax basis in the Securities
generally will be equal to the holder's purchase price for the Securities
increased by all amounts previously accrued as interest to the date of
disposition. Any gain recognized by such holder on such disposition will be
treated as interest income. Any loss recognized by such holder on such
disposition first will be treated as an ordinary loss to the extent of all
amounts required to be accrued as interest on the Securities pursuant to the
rules described above. Any remaining loss will be treated as a capital loss and
will be a long-term capital loss if the holder's holding period for the
Securities disposed of exceeds one year.
BACKUP WITHHOLDING TAX
Certain non-corporate U.S. persons may be subject to backup withholding tax
at a rate of 31 percent on payments of principal, premium and interest on, and
the proceeds of disposition of, the Securities. Backup withholding tax will be
imposed only if the holder (i) fails to furnish its taxpayer identification
number ("TIN"), which, for an individual, would be his or her Social Security
number, (ii) furnishes an incorrect TIN, (iii) is notified by the Service that
it has failed to report properly payments of interest or dividends or (iv) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the Service that it is
subject to backup withholding tax for failure to report interest or dividend
payments. Holders of Securities should consult their tax advisors regarding
their qualification for exemption from backup withholding tax and the procedure
for obtaining such an exemption if applicable.
The amount of any backup withholding tax imposed on a payment to a holder of
Securities will be allowed as a credit against such holder's U.S. federal income
tax liability and may entitle such holder to a refund, provided that the
required information is furnished to the Service.
TAX-EXEMPT HOLDERS OF THE SECURITIES
Certain U.S. entities (e.g., certain individual retirement accounts, pension
plans and charitable organizations) are generally exempt from U.S. federal
income taxation (each, a "Tax-Exempt") and are subject to U.S. federal income
tax only with respect to income derived from a trade or business that is
unrelated to their exempt activities ("unrelated business taxable income" or
"UBTI"). Interest is specifically excluded from the definition of UBTI and,
accordingly, a Tax-Exempt generally may receive or accrue interest income
without the imposition of U.S. federal income tax. Such exclusion from U.S.
federal income tax is not available to the extent the Securities constitute
debt-financed property to the Tax-Exempt holder within the meaning of Section
514 of the Internal Revenue Code of 1986, as amended. The Securities will
generally constitute debt-financed property to the extent a Tax-Exempt holder
borrows to acquire the Securities. The foregoing summary only addresses certain
of the tax considerations relating to an investment in the Securities by a
Tax-Exempt holder and is not intended to address all of the tax considerations
that may be relevant to a Tax-Exempt holder of the Securities. Accordingly,
Tax-Exempt holders are urged to consult their tax advisors as to the
consequences under U.S. federal, state, local, foreign and other tax laws of
purchasing, holding and disposing of the Securities.
USE OF PROCEEDS AND HEDGING
The net proceeds to be received by the Company from the sale of the
Securities will be used for general corporate purposes and, in part, by the
Company or one or more of its subsidiaries in connection with hedging the
Company's obligations under the Securities. On or prior to the date of this
Prospectus Supplement, the Company, through its subsidiaries and others, will
hedge its anticipated exposure in
S-22
<PAGE>
connection with the Securities by the purchase and sale of exchange-traded and
over-the-counter options on, or other derivative or synthetic instruments
related to, the Index, individual stocks included in the Index, futures
contracts on the Index and/or options on such futures contracts. From time to
time after the initial offering and prior to the maturity of the Securities,
depending on market conditions (including the value of the Index), in connection
with hedging with respect to the Securities, the Company expects that it and/or
one or more of its subsidiaries will increase or decrease their initial hedging
positions using dynamic hedging techniques and may take long or short positions
in the Index, individual stocks included in the Index, listed or
over-the-counter options contracts in, or other derivative or synthetic
instruments related to, the Index and such individual stocks. In addition, the
Company and/or one or more of its subsidiaries may purchase or otherwise acquire
a long or short position in the Securities from time to time and may, in their
sole discretion, hold or resell such Securities. The Company or one or more of
its subsidiaries may also take positions in other types of appropriate financial
instruments that may become available in the future. To the extent that the
Company or one or more of its subsidiaries have a long hedge position in the
Index, individual stocks included in the Index or options contracts in, or other
derivative or synthetic instruments related to, the Index and such underlying
stocks, the Company or one or more of its subsidiaries may liquidate a portion
of their holdings at or about the time of the maturity of the Securities.
Depending, among other things, on future market conditions, the aggregate amount
and the composition of such positions are likely to vary over time. Profits or
losses from any such position cannot be ascertained until such position is
closed out and any offsetting position or positions are taken into account.
Although the Company has no reason to believe that such hedging activity will
have a material impact on the price of such options, stocks, futures contracts
and options on futures contracts or on the value of the Index, there can be no
assurance that the Company and its subsidiaries will not affect such prices or
value as a result of its hedging activities. See also "Use of Proceeds" in the
accompanying Prospectus.
UNDERWRITING
Smith Barney (the "Underwriter") has agreed, subject to the terms and
conditions of the Terms Agreement dated , 1997, which incorporates by
reference the Underwriting Agreement Basic Provisions dated October 29, 1993
(collectively, the "Underwriting Agreement"), to purchase from the Company
$ aggregate principal amount of Securities. The Underwriting Agreement
provides that the obligations of the Underwriter to pay for and accept delivery
of the Securities are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriter is committed to take
and pay for all of the Securities if any are purchased.
The Underwriter has advised the Company that it proposes initially to offer
all or part of the Securities directly to the public at the offering prices set
forth on the cover page of this Prospectus Supplement and to certain dealers at
such prices less a concession not in excess of $ per Unit. After the initial
public offering, the public offering price and concession may be changed.
The Company intends to apply for listing of the Securities on the CBOE.
However, there can be no assurance as to whether there will be a secondary
market in the Securities or, if there were to be such a secondary market,
whether such market would be liquid or illiquid. The Securities will be a new
issue of securities with no established trading market. The Underwriter intends
to make a market in the Securities, subject to applicable laws and regulations.
However, the Underwriter is not obligated to do so and any such market-making
may be discontinued at any time at the sole discretion of the Underwriter
without notice. Accordingly, no assurance can be given as to the liquidity of
such market.
The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
The Company and/or one or more of its subsidiaries may from time to time
purchase or acquire a position in the Securities and may, at its option, hold or
resell such Securities. Smith Barney expects to offer and sell previously-issued
Securities in the course of its business as a broker-dealer. Smith Barney
S-23
<PAGE>
may act as principal or agent in such transactions. This Prospectus Supplement
and the accompanying Prospectus may be used by the Company or any of its
subsidiaries, including Smith Barney, in connection with such transactions. Such
sales, if any, will be made at varying prices related to prevailing market
prices at the time of sale.
Smith Barney, a member of the National Association of Securities Dealers,
Inc. (the "NASD") and an affiliate of the Company, may participate in
distributions of the Securities. Accordingly, the offerings of Securities will
conform with the requirements of Rule 2720 of the Conduct Rules of the NASD
regarding a NASD member firm's underwriting of securities of an affiliate.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 31, 1995 and 1994, and for each of the years in the three-year period
ended December 31, 1995, included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, have been incorporated by reference
herein, in reliance upon the report (also incorporated by reference herein) of
Coopers & Lybrand L.L.P., independent auditors, and upon the authority of said
firm as experts in accounting and auditing.
LEGAL OPINIONS
The validity of the Securities offered hereby will be passed upon for the
Company by A. George Saks, Esq., as counsel for the Company, 388 Greenwich
Street, New York, New York 10013 and for the Underwriter by Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York 10022. Skadden,
Arps, Slate, Meagher & Flom LLP has also acted as special tax counsel to the
Company in connection with this offering. Mr. Saks, Vice President and General
Counsel of the Company, beneficially owns, or has rights to acquire under
Travelers Group Inc. employee benefit plans, an aggregate of less than 1% of the
common stock of Travelers Group Inc., the parent of the Company. Skadden, Arps,
Slate, Meagher & Flom LLP has from time to time acted as counsel for Travelers
Group Inc. and certain of its subsidiaries and may do so in the future. Mr.
Kenneth J. Bialkin, a partner in that firm, is a director of Travelers Group
Inc., and he and other attorneys in such firm beneficially own an aggregate of
less than 1% of the common stock of Travelers Group Inc.
S-24
<PAGE>
PROSPECTUS
SMITH BARNEY HOLDINGS INC.
Debt Securities
---------------
Smith Barney Holdings Inc. (the "Company") may offer from time to time its
debt securities (the "Securities") at an aggregate initial offering price not
expected to exceed $1,000,000,000 (or the equivalent in foreign denominated
currencies or composite currencies, based on the applicable exchange rate at the
time of offering), on terms to be determined by the Company at the time of sale.
When a particular series of Securities is offered (the "Offered Securities"), a
supplement to this Prospectus (the "Prospectus Supplement") will be delivered
with this Prospectus setting forth with respect to such series: the specific
designation, aggregate principal amount, maturity, purchase price,
denominations, currency, rate (which may be fixed or variable) and time of
payment of any interest, any sinking fund, any terms of redemption at the option
of the Company or the holder, any listing on a securities exchange and any other
variable terms.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
The Offered Securities sold by the Company will be sold directly, or
through agents designated from time to time, or through underwriters or dealers,
which may be a group of underwriters represented by one or more firms. If any
agents of the Company or any underwriters are involved in the sale by the
Company of Offered Securities, the names of such agents or underwriters and any
applicable fee, commission, purchase price or discount arrangements with them
will be set forth, or will be calculable from the information set forth, in the
Prospectus Supplement. The net proceeds to the Company from such sale will be
set forth in the Prospectus Supplement. The Company may also sell Offered
Securities directly to investors on its own behalf. This Prospectus, together
with an appropriate Prospectus Supplement, may also be used by Smith Barney Inc.
("Smith Barney"), a subsidiary of the Company, in connection with offers and
sales of the Offered Securities in market-making transactions at negotiated
prices related to prevailing market prices at the time of sale. Smith Barney may
act as principal or agent in such transactions.
December 20, 1996
<PAGE>
No person is authorized to give any information or to make any
representation not contained in this Prospectus or any accompanying Prospectus
Supplement and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company or Smith Barney. This
Prospectus and any accompanying Prospectus Supplement do not constitute an offer
of any securities other than the securities to which the Prospectus Supplement
relates, or an offer to any person in any jurisdiction where such offer would be
unlawful. Neither the delivery of this Prospectus or any Prospectus Supplement
nor any sale made hereunder or thereunder shall, under any circumstances, create
any implication that there has not been any change in the affairs of the Company
or its subsidiaries since the date hereof.
For North Carolina purchasers: These securities have not been approved or
disapproved by the Commissioner of Insurance for the State of North Carolina,
nor has the Commissioner ruled upon the accuracy or adequacy of this Prospectus.
---------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the public reference facilities maintained by the Commission at: Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549; Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; and Seven World Trade Center,
New York, New York 10048. Copies of such material can also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a
site on the World Wide Web, the address of which is http://www.sec.gov, that
contains reports, proxy and information statements and other information
regarding issuers, such as the Company, that file electronically with the
Commission. Certain of the Company's debt securities are listed on the New York
Stock Exchange, Inc. (the "NYSE") and such reports and other information can
also be inspected at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.
---------------
The Company has filed with the Commission Registration Statements on Form
S-3 under the Securities Act of 1933, as amended (the "Act") with respect to the
Securities. For further information with respect to the Company and the
Securities, reference is made to the Registration Statements and exhibits
thereto. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the Company's Registration Statements, each such statement being qualified in
all respects by such reference.
---------------
IN CONNECTION WITH THE OFFERING OF CERTAIN OF THE SECURITIES, THE
UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICES OF SUCH OFFERED SECURITIES OR OTHER SECURITIES OF THE COMPANY
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference the following documents heretofore
filed with the Commission pursuant to the Exchange Act:
1. Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1995.
2. Quarterly Reports of the Company on Form 10-Q for the fiscal quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996.
3. Current Reports of the Company on Form 8-K dated January 16, 1996,
January 25, 1996, April 15, 1996, July 15, 1996, August 7, 1996 (filed
August 7, 1996), August 7, 1996 (filed August 9, 1996), October 7,
1996, October 14, 1996 and November 13, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the later of (i) the termination of the offering of Offered Securities hereby
and (ii) the date on which Smith Barney ceases offering and selling Offered
Securities pursuant to this Prospectus shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
in an accompanying Prospectus Supplement or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus except as
so modified or superseded.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
by reference in the Registration Statements of which this Prospectus forms a
part other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into such documents. Requests should be directed to
Smith Barney Holdings Inc., 388 Greenwich Street, New York, New York 10013;
Attention: Treasurer; telephone (212) 816-6000.
THE COMPANY
The Company provides investment banking, asset management, brokerage and
other financial services through its wholly owned subsidiaries. Its principal
operating subsidiary is Smith Barney, an investment banking, securities trading
and brokerage firm that traces its origins back to 1873. As of September 30,
1996, the Company employs approximately 10,430 financial consultants operating
out of approximately 450 branch offices.
The Company is an investment banking and securities trading and brokerage
firm serving United States and foreign corporations, governments and
institutional and individual investors. Its businesses
3
<PAGE>
include securities, options and commodities brokerage for domestic and
international institutional and individual clients; underwriting and
distribution of securities; arranging for the private placement of securities;
assisting in mergers and acquisitions and providing financial advisory services;
market making and trading in corporate debt and equity, United States government
and agency, mortgage-related and municipal securities and foreign exchange,
futures and forward contracts; consumer financing activities; securities lending
activities; investment management and advisory services; securities research,
and other activities.
The Company's investment banking services include the underwriting of debt
and equity issues for United States and foreign corporations and for state,
local and other governmental and government sponsored authorities. Frequently,
the Company acts as managing underwriter in corporate and public securities
offerings. The Company also acts as a private placement agent for various
clients and as such helps to place securities for clients with large
institutions and other eligible investors. The Company also provides financial
advice to investment banking clients on a wide variety of transactions including
securities offerings, mergers and acquisitions and corporate restructurings.
The Company provides discretionary and non-discretionary asset management
and consulting services to a wide array of mutual funds and institutional and
individual investors, with respect to domestic and foreign equity and debt
securities, municipal bonds, money market instruments, and related options and
futures contracts. The Company typically receives ongoing fees from its asset
management and consulting clients, generally stated as a percentage of the
client's assets with respect to which the Company's services are rendered. At
September 30, 1996, such client assets in the aggregate exceeded $105 billion.
The Company is a wholly owned subsidiary of Travelers Group Inc.
("Travelers Group"), a financial services holding company engaged, through its
subsidiaries, principally in four business segments: (i) Investment Services
(through the Company); (ii) Consumer Finance Services; (iii) Life Insurance
Services; and (iv) Property & Casualty Insurance Services. The periodic reports
of Travelers Group provide additional business and financial information
concerning that company and its consolidated subsidiaries.
The principal offices of the Company are located at 388 Greenwich Street,
New York, New York 10013, telephone (212) 816-6000. The Company was incorporated
in Delaware in 1989.
4
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
Nine
Months Year Ended December 31,
Ended --------------------------------------
9/30/96 1995 1994 1993 1992 1991
------- ---- ---- ---- ---- ----
Ratio of earnings
to fixed charges..... 1.95 1.71 1.81 2.68 2.06 1.69
- ----------
The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes and fixed charges by the fixed charges. For the
purpose of this ratio, fixed charges consist of interest expense and that
portion of rentals deemed representative of the appropriate interest factor.
USE OF PROCEEDS
Unless otherwise indicated in an accompanying Prospectus Supplement with
respect to the proceeds from the sale of any particular Offered Securities, the
Company intends to apply the net proceeds from the sale of Offered Securities
for general corporate purposes, which may include capital contributions to
subsidiaries of the Company and/or the reduction or refinancing of borrowings of
the Company or its subsidiaries. In order to fund its investment brokerage
business, the Company expects to incur additional indebtedness in the future.
DESCRIPTION OF SECURITIES
The following description of the terms of the Securities sets forth certain
general terms and provisions of the Securities to which any Prospectus
Supplement may relate. The particular terms of the Securities offered by any
Prospectus Supplement (the "Offered Securities") and the extent, if any, to
which such general provisions may apply to the Securities so offered will be
described in the Prospectus Supplement relating to such Securities.
The Securities will be issued under an indenture, between the Company and a
trustee, that has been or will be filed as an exhibit to or incorporated by
reference in the Registration Statements of which this Prospectus forms a part.
Unless otherwise indicated in an accompanying Prospectus Supplement, the
Securities will be issued under an Indenture dated as of May 15, 1993, between
the Company and Citibank, N.A., as Trustee (the "Trustee"), as supplemented by
the First Supplemental Indenture dated as of September 1, 1993, between the
Company and the Trustee and the Second Supplemental Indenture dated as of
December 12, 1996, between the Company and the Trustee (the indenture as so
supplemented is hereinafter referred to as the "Indenture"). The following
summary of certain provisions of the Indenture does not purport to be complete
and is subject to, and qualified in its entirety by reference to, the Indenture,
a copy of which has been incorporated by reference or filed as an exhibit to the
Registration Statements of which this Prospectus forms a part. Capitalized terms
used and not otherwise defined in this section shall have the meanings assigned
to them in the Indenture. Parenthetical section references refer to sections of
the Indenture.
5
<PAGE>
General
The Securities will be unsecured general obligations of the Company. As a
holding company, the Company's sources of funds are derived principally from
advances and dividends from subsidiaries, certain of which are subject to
regulatory considerations, and from sales of assets and investments. The
Indenture provides that the Securities and other unsecured debt securities of
the Company, without limitation as to aggregate principal amount, may be issued
in one or more series, and a single series may be issued at various times, with
different maturity dates and different interest rates, in each case as
authorized from time to time by the Company. One or more series of the
Securities may be issued with the same or various maturities at par or at a
discount.
Reference is made to the Prospectus Supplement relating to a particular
series of Securities for the following terms, where applicable, of the Offered
Securities:
(1) the designation of the Offered Securities;
(2) any limit on the aggregate principal amount of the Offered
Securities and, if applicable, the method for determining the amount of
principal payable at maturity;
(3) the date or dates on which the principal of, and premium, if any,
on the Offered Securities shall be payable, or the method by which such
date or dates shall be determined;
(4) the rate or rates (which may be fixed or variable) at which the
Offered Securities shall bear interest, if any, the date or dates from
which any such interest shall accrue, or the method by which such rate or
rates shall be determined, the Interest Payment Dates on which such
interest shall be payable and the Regular Record Date for the interest
payable on any Interest Payment Date;
(5) the place or places where the principal of, premium, if any, and
interest on the Offered Securities shall be payable;
(6) if applicable, the period or periods within which or the date or
dates on which, the price or prices at which and the terms and conditions
upon which the Offered Securities may be redeemed, in whole or in part, at
the option of the Company;
(7) the obligation, if any, of the Company to redeem or purchase the
Offered Securities pursuant to any sinking fund or analogous provisions or
at the option of a Holder thereof and the period or periods within which,
the price or prices at which and the terms and conditions upon which the
Offered Securities shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(8) any special provisions relating to the issuance of any Bearer
Securities of any series;
(9) if other than Dollars, the currency of denomination of the Offered
Securities, and the currency or currencies in which payment of the
principal of, premium, if any, and interest on the Offered Securities will
be made;
6
<PAGE>
(10) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company set forth in the Indenture
pertaining to the Offered Securities;
(11) the form of the Offered Securities and Coupons, if any, and if
the Offered Securities are to be issuable in definitive form (whether upon
original issue or upon exchange of a temporary Security of such series)
only upon receipt of certain certificates or other documents or
satisfaction of other conditions, the form and/or terms of such
certificates, documents or conditions;
(12) whether the Offered Securities shall be issued in whole or in
part in global form, including Book-Entry Securities, and the Depositary
for such Global Securities; and
(13) any other terms of the Offered Securities not inconsistent with
the provisions of the Indenture (Section 301).
Under the Indenture, the Company may authorize the issuance and provide the
terms of a series of Securities pursuant to a supplemental indenture or pursuant
to a resolution of its Board of Directors, any duly authorized committee of the
Board or any committee of officers or other representatives of the Company duly
authorized by the Board of Directors for such purpose. The provisions of the
Indenture provide the Company with the ability, in addition to the ability to
issue Securities with terms different from those of Securities previously
issued, to "reopen" a previous issue of a series of Securities and to issue
additional Securities of such series.
The Securities will be issuable as Registered Securities, as Bearer
Securities or both. Securities of a series may be issuable in the form of one or
more Global Securities, as described below under "Global Securities." Unless
otherwise provided in the Prospectus Supplement accompanying this Prospectus,
Registered Securities denominated in United States dollars will be issued only
in denominations of $1,000 or any integral multiple thereof, and Bearer
Securities denominated in United States dollars will be issued only in
denominations of $5,000 or any integral multiple thereof (Section 302). The
Prospectus Supplement relating to Offered Securities denominated in a foreign or
composite currency will specify the denomination thereof (Section 302).
Denominations, Registration and Transfer
At the option of the Holder upon request confirmed in writing, and subject
to the terms of the Indenture, Bearer Securities (with all unmatured Coupons,
except as provided below) of any series will be exchangeable into an equal
aggregate principal amount of Registered Securities or Bearer Securities of the
same series (with the same interest rate and maturity date), and Registered
Securities of any series will be exchangeable into an equal aggregate principal
amount of Registered Securities of the same series (with the same interest rate
and maturity date), of different authorized denominations. If a Holder
surrenders Bearer Securities in exchange for Registered Securities between a
Regular Record Date or, in certain circumstances, a Special Record Date, and the
relevant Interest Payment Date, such Holder will not be required to surrender
the Coupon relating to such interest payment date. Registered Securities may not
be exchanged for Bearer Securities (Section 305).
Securities may be presented for exchange, and Registered Securities (other
than a Global Security) may be presented for registration of transfer, at the
office of any transfer agent or at the office of the Security Registrar. No
service charge will be made for any registration of transfer or exchange of
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other
7
<PAGE>
governmental charge payable in connection therewith. All Registered Securities
presented or surrendered for registration of transfer or for exchange shall (if
so required by the Company or the Trustee) be duly endorsed by, or accompanied
by a written instrument of transfer in a form satisfactory to the Company and
the Security Registrar duly executed by, the Holder or his attorney duly
authorized in writing (Section 305). Bearer Securities will be transferable by
delivery.
Securities may be issued under the Indenture as Original Issue Discount
Securities to be offered and sold at a substantial discount from the principal
amount thereof. If the Offered Securities are Original Issue Discount
Securities, the special Federal income tax, accounting and other considerations
applicable thereto will be described in the Prospectus Supplement relating
thereto. As defined in the Indenture, "Original Issue Discount Security" means
any security which provides for an amount less than the principal amount thereof
to be due and payable upon a declaration of acceleration of the Maturity thereof
upon the occurrence of an Event of Default and the continuation thereof
(Sections 101 and 502).
Payment and Paying Agents
Payment of principal of and premium, if any, on Registered Securities
(other than a Global Security) will be made in the designated currency against
surrender of such Securities at the principal corporate trust office of the
Trustee in The City of New York. Unless otherwise indicated in the Prospectus
Supplement, payment of any installment of interest on Registered Securities will
be made to the person in whose name such Security is registered at the close of
business on the Regular Record Date for such interest. Unless otherwise
indicated in the Prospectus Supplement, payments of such interest will be made
at the principal corporate trust office of the Trustee in The City of New York,
or by a check mailed to the Holder at such Holder's registered address (Sections
307 and 901).
Payment of principal of and premium, if any, and interest on Bearer
Securities will be payable in the currency and in the manner designated in the
Prospectus Supplement, subject to any applicable laws and regulations, at such
paying agencies outside the United States as the Company may appoint from time
to time. The paying agents outside the United States initially appointed by the
Company for a series of Securities will be named in the Prospectus Supplement.
The Company may terminate the appointment of any of the paying agents from time
to time, except that the Company will maintain at least one paying agent in The
City of New York for payments with respect to Registered Securities and such
other paying agents as shall be required (Section 902).
All moneys paid by the Company to a paying agent for the payment of
principal of or premium, if any, or interest on any Security that remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will be repaid to the Company together with
interest accrued thereon, if any, and the Holder of such Security or any Coupon
appertaining thereto will thereafter look only to the Company for payment
thereof (Section 903).
Global Securities
The Securities of a series may be issued in whole or in part in the form of
one or more Global Securities that will be deposited with, or on behalf of, a
depository identified in the Prospectus Supplement relating to such series
(Section 301 and 303).
The specific terms of the depository arrangement with respect to a series
of Offered Securities will be described in the Prospectus Supplement relating to
such series. Unless otherwise indicated in any
8
<PAGE>
accompanying Prospectus Supplement, the following provisions will apply to any
depository arrangements.
Global Securities will be deposited with, or on behalf of, The Depository
Trust Company ("DTC") and registered in the name of DTC or its nominee. Except
as set forth below or in an accompanying Prospectus Supplement, Global
Securities may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any nominee
to a successor of DTC or a nominee of such successor.
DTC has advised the Company that it 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. DTC holds securities for persons that have accounts
with DTC ("participants") and facilitates the settlement among participants of
securities transactions through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. DTC's participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations, some of which (and/or their representatives) own DTC. Access to
DTC's book-entry system is also available to others, such as securities brokers
and dealers, banks, and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Upon the issuance by the Company of a Global Security, DTC will credit, on
its book-entry registration and transfer system, the respective principal
amounts of the Securities represented by such Global Security to the accounts of
participants. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests in Global Securities will be shown on, and the
transfer of such interests will be effected only through, records maintained by
DTC or its nominee (with respect to beneficial interests of participants) or by
participants or persons that may hold interests through participants (with
respect to beneficial interests of beneficial ownership). The laws of some
states may require that certain purchasers of securities take physical delivery
of such securities in certificated form. Such limits and such laws may impair
the ability to transfer beneficial interests in Global Securities.
So long as DTC or its nominee is the registered owner of the Global
Securities, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the Securities represented by such Global Securities for all
purposes under the Indenture. Except as provided in an accompanying Prospectus
Supplement, owners of beneficial interests in Global Securities will not be
entitled to have Securities represented by such Global Securities registered in
their names, will not receive or be entitled to receive physical delivery of
such Securities in certificated form and will not be considered the owners or
holders thereof under the Indenture.
Covenants
Limitations on Liens. The Company has agreed that it will not, and will not
permit any Subsidiary to, incur, issue, assume or guarantee any Indebtedness if
such Indebtedness is secured by a pledge of, lien on, or security interest in
any shares of Voting Stock of any Significant Subsidiary, whether such Voting
Stock is now owned or is hereafter acquired, without providing that each series
of Securities issued under the Indenture (together with, if the Company shall so
determine, any other indebtedness or obligations of
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<PAGE>
the Company or any Subsidiary ranking equally with such Securities and then
existing or thereafter created) shall be secured equally and ratably with such
Indebtedness. The foregoing limitation shall not apply to indebtedness secured
by a pledge of, lien on or security interest in any shares of Voting Stock of
any corporation at the time it becomes a Significant Subsidiary (Section 905).
Limitations on Mergers and Sales of Assets. The Company may not consolidate
or merge with or into any other corporation or sell, lease, transfer or
otherwise dispose of all or substantially all its assets to another Person
unless (a) the successor Person (if other than the Company) is organized and
existing under the laws of the United States of America or a State thereof or
the District of Columbia and assumes payment of the principal of and interest on
the Securities and the performance and the observance of the Indenture and (b)
such successor Person (or the Company) shall not, immediately after such merger
or consolidation, be in default in the performance of any covenant or condition
of the Indenture (Section 701).
Limitation on Indebtedness of a Subsidiary. As of September 1, 1993, the
First Supplemental Indenture, among other things, added a covenant of the
Company to the effect that for so long as any Securities are Outstanding, the
Company will not permit Smith Barney (Delaware) Inc. (formerly Smith Barney
Inc.), one of its Subsidiaries, to incur or suffer to exist any Indebtedness
(Section 908).
Certain Definitions. The term "Indebtedness" means any and all obligations
of a corporation for money borrowed which in accordance with generally accepted
accounting principles would be reflected on the balance sheet of such
corporation as a liability on the date as of which Indebtedness is to be
determined. The term "Significant Subsidiary" means a Subsidiary, including its
Subsidiaries, which meets any of the following conditions: (a) the Company's and
its other Subsidiaries' investments in and advances to the Subsidiary exceed 10
percent of the total assets of the Company and its Subsidiaries consolidated as
of the end of the most recently completed fiscal year; (b) the Company's and its
other Subsidiaries' proportionate share of the total assets (after intercompany
eliminations) of the Subsidiary exceeds 10 percent of the total assets of the
Company and its Subsidiaries consolidated as of the end of the most recently
completed fiscal year; or (c) the Company's and its other Subsidiaries' equity
in the income from continuing operations before income taxes, extraordinary
items and cumulative effect of a change in accounting principles of the
Subsidiary exceeds 10 percent of such income of the Company and its Subsidiaries
consolidated for the most recently completed fiscal year. The term "Subsidiary"
means a corporation more than 50% of the outstanding Voting Stock of which is
owned, directly or indirectly, by the Company or by one or more other
Subsidiaries, or by the Company and one or more other Subsidiaries. The term
"Voting Stock" means capital stock the holders of which have general voting
power under ordinary circumstances to elect at least a majority of the board of
directors of a corporation, provided that, for the purposes of such definition,
capital stock which carries only the right to vote conditioned on the happening
of an event shall not be considered voting stock whether or not such event shall
have happened (Sections 101 and 905).
The use of the term "all or substantially all" in Indenture provisions such
as the covenant regarding the limitations on mergers and sales of assets has not
been interpreted under New York law (which is the governing law of the
Indenture) to represent a specific quantitative test. Accordingly, there may be
a degree of uncertainty in ascertaining whether a particular transaction would
involve a disposition of "all or substantially all" of the assets of a person,
which uncertainty should be considered by prospective purchasers of Offered
Securities.
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Modification and Waiver of the Indenture
Modifications and amendments to the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the Outstanding Securities of each series affected thereby; provided,
however, that no such modification or amendment may, without the consent of the
Holder of each Outstanding Security affected thereby, (a) change the stated
maturity date of the principal of, or any installment of principal of or
interest on, any Security issued under the Indenture, (b) reduce the principal
amount of, or the premium, if any, or interest, if any, on, any Security, (c)
reduce the amount of principal of any Original Issue Discount Security payable
upon acceleration of the Maturity thereof, (d) change the coin or currency in
which any Securities or premium, if any, or interest, if any, thereon is
payable, or (e) reduce the percentage in principal amount of Outstanding
Securities of any series, the consent of the Holders of which is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults (Section
802).
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any Holder to evidence a successor to the
Company, to add to the Company's covenants or Events of Default, to permit or
facilitate Securities to be issued by book-entry or in bearer form or relating
to the place of payment thereof, to provide for a successor trustee, to
establish forms or terms of Securities, to change or eliminate any provision not
adversely affecting any interests of Holders of Outstanding Securities in any
material respect or to cure any ambiguity or inconsistency (Section 801).
The Holders of a majority in principal amount of the Outstanding Securities
of any series may on behalf of the Holders of all Securities of that series
waive, insofar as that series is concerned, compliance by the Company with
certain restrictive provisions of the Indenture (Section 906). The Holders of a
majority in principal amount of the Outstanding Securities of any series may on
behalf of the Holders of all Securities of that series waive any past default
under the Indenture with respect to Securities of that series, except a default
in the payment of the principal of, or premium, if any, or interest, if any, on,
any Security of that series or in respect of any provision which under the
Indenture cannot be modified or amended without the consent of the Holder of
each Outstanding Security of that series affected (Section 511).
Events of Default
The following are Events of Default under the Indenture with respect to
Securities of any series: (a) failure to pay principal of or premium, if any, on
any Security of that series at its Maturity; (b) failure to pay any interest on
any Security of that series when due, continued for 30 days; (c) failure to
deposit any sinking fund payment, when due, in respect of any Security of that
series; (d) any other defaults in the performance, or breach, of any covenant of
the Company in the Indenture, continued for 60 days after written notice of such
default or breach from the Trustee or the Holders of at least 25% in principal
amount of the Outstanding Securities of that series; (e) the occurrence of a
default in payment of any debt that results from borrowing in excess of
$50,000,000, or any interest thereon, for a period longer than the specified
period of grace, which default shall have resulted in acceleration of the
maturity of such debt without such acceleration having been rescinded after due
notice in writing to the Company of such default by the Trustee or by such
notice to the Company and the Trustee by Holders of at least 10% of the
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principal amount of the Outstanding Securities of that series; (f) certain
events of bankruptcy, insolvency or reorganization; and (g) any other Event of
Default provided with respect to Securities of that series (Section 501).
In accordance with applicable provisions of the Trust Indenture Act of
1939, as amended (the "TIA"), the Trustee is required to give the Holders notice
of all defaults known to the Trustee within 90 days after the occurrence
thereof, in the manner and to the extent provided by the TIA. The TIA further
provides that except in the case of default in the payment of the principal of
or interest on any indenture security, or in the payment of any sinking fund or
purchase fund installment, the Trustee shall not be required to give such notice
if it determines that withholding the notice is in the interests of the
indenture security holders.
If an Event of Default with respect to Outstanding Securities of any series
shall occur and be continuing, either the Trustee or the Holders of at least 25%
in principal amount of the Outstanding Securities of that series may declare the
principal amount (or, if the Securities of that series are Original Issue
Discount Securities, such portion of the principal amount as may be specified in
the terms of that series) of all Securities of that series to be due and payable
immediately. However, at any time after a declaration of acceleration with
respect to Securities of any series has been made, but before a judgment or
decree based on such acceleration has been obtained, the Holders of a majority
in principal amount of Outstanding Securities of that series may, under certain
circumstances, rescind and annul such acceleration (Section 502). For
information as to waiver of defaults, see "Modification of the Indenture,"
above. Reference is made to the Prospectus Supplement relating to each series of
Offered Securities that are Original Issue Discount Securities for the
particular provisions relating to acceleration of the Maturity of a portion of
the principal amount of such Original Issue Discount Securities upon the
occurrence of an Event of Default and the continuation thereof.
The Indenture provides that, subject to the provisions of the TIA, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the Holders, unless
such Holders shall have offered to the Trustee reasonable indemnity (Section
601). Subject to such provisions for indemnification of the Trustee, the Holders
of a majority in principal amount of the Outstanding Securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee, with respect to the Securities of that series
(Section 510).
The Company will be required to furnish to the Trustee annually a statement
as to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance (Section 907).
Defeasance
The Indenture provides that, if specified with respect to the Securities of
a particular series, the Company (a) shall be discharged from its obligations in
respect of the Securities of such series ("defeasance and discharge"), or (b)
may cease to comply with the restrictive covenants ("covenant defeasance") in
Article Seven (Consolidation, Merger or Sale), Section 905 (Limitations on
Liens) and Section 908 (Limitation on Indebtedness of Smith Barney (Delaware)
Inc. (formerly Smith Barney Inc.)), and any such omission shall not be an Event
of Default with respect to the Securities of such series, in each case at any
time prior to the Stated Maturity or redemption thereof, when the Company has
irrevocably deposited with the Trustee, in trust, (i) sufficient funds in the
currency or currency unit in
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<PAGE>
which the Securities are denominated to pay the principal of (and premium, if
any), and interest to Stated Maturity (or redemption) on, the Securities of such
series, or (ii) such amount of direct obligations of, or obligations the
principal of and interest on which are fully guaranteed by, the government which
issued the currency in which the Securities are denominated, and which are not
subject to prepayment, redemption or call, as will, together with the
predetermined and certain income to accrue thereon without consideration of any
reinvestment thereof, be sufficient to pay when due the principal of (and
premium, if any), and interest to Stated Maturity (or redemption) on, the
Securities of such series. Such defeasance and discharge and covenant defeasance
are conditioned upon the Company's delivery of an opinion of counsel that the
Holders of the Securities of such series will have no federal income tax
consequences as a result of such deposit, and will be taxed in the same manner
as if no defeasance and discharge or covenant defeasance, as the case may be,
had occurred. Upon such defeasance and discharge, the Holders of the Securities
of such series shall no longer be entitled to the benefits of the Indenture,
except for the purposes of registration of transfer and exchange of the
Securities of such series and replacement of lost, stolen or mutilated
Securities and shall look only to such deposited funds or obligations for
payment (Section 403).
Concerning the Trustee
Citibank, N.A. is the Trustee under the Indenture. The Company and its
affiliates have and may from time to time in the future have banking
relationships with the Trustee in the ordinary course of business.
PLAN OF DISTRIBUTION
The Company may offer the Securities in any of the following ways: (i)
through underwriters or dealers; (ii) directly; (iii) through agents; or (iv)
through a combination of any such methods of sale. The Prospectus Supplement
with respect to an offering of Offered Securities will set forth the terms of
such offering, including the name or names of any underwriters, the purchase
price of the Offered Securities and the proceeds to the Company from such sale,
any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers and any securities exchanges on which
such Offered Securities may be listed.
If underwriters are used in an offering of Securities, such Securities will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
a fixed public offering price or at varying prices determined at the time of
sale. The Securities may be either offered to the public through underwriting
syndicates represented by one or more managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the Prospectus Supplement,
the obligations of the underwriters to purchase Offered Securities will be
subject to certain conditions precedent and the underwriters will be obligated
to purchase all such Offered Securities if any are purchased. Any initial public
offering price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
Offered Securities also may be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of the Offered Securities in respect of which this Prospectus is
delivered will be named, and the terms of any such agency (including any
commissions payable by the Company to such agent) will be set forth, in the
applicable Prospectus Supplement. Unless otherwise indicated in such Prospectus
Supplement, any such agent will be acting on a best efforts basis for the period
of its appointment.
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As one of the means of direct issuance of Offered Securities, the Company
may utilize the services of an entity through which it may conduct an electronic
"dutch auction" or similar offering of the Offered Securities among potential
purchasers who are eligible to participate in the auction or offering of such
Offered Securities, if so described in the applicable Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in the
future. Such contracts will be subject only to those conditions set forth in the
Prospectus Supplement and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
The anticipated date of delivery of Offered Securities will be as set forth
in the Prospectus Supplement relating to the offering of such Securities.
This Prospectus together with an applicable Prospectus Supplement may also
be used by Smith Barney, a subsidiary of the Company, in connection with offers
and sales of the Securities in market-making transactions at negotiated prices
related to prevailing market prices at the time of sale. Smith Barney may act as
principal or agent in such transactions. Smith Barney has no obligation to make
a market in any of the Securities and may discontinue any market-making
activities at any time without notice, at its sole discretion. The Securities
issued hereunder will be new issues of securities with no established trading
market, and no assurance can be made as to the existence or liquidity of a
trading market for such Securities.
Smith Barney, a member of the National Association of Securities Dealers,
Inc. (the "NASD") and an affiliate of the Company, may participate in
distributions of the Offered Securities. Accordingly, the offerings of Offered
Securities will conform with the requirements of Rule 2720 of the Conduct Rules
of the NASD regarding a NASD member firm's underwriting of securities of an
affiliate.
Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification by the Company against certain civil
liabilities, including liabilities under the Act. Underwriters, dealers and
agents may engage in transactions with, or perform services for, the Company and
affiliates of the Company.
ERISA MATTERS
By virtue of the Company's affiliation with certain of its subsidiaries and
certain subsidiaries of Travelers Group, including insurance company
subsidiaries and Smith Barney, that provide services to many employee benefit
plans, including investment advisory and asset management activities, the
Company, Travelers Group and any direct or indirect subsidiary of either of them
may each be considered a "party in interest" within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and a
"disqualified person" under corresponding provisions of the Internal Revenue
Code of 1986 (the "Code"), with respect to many employee benefit plans.
"Prohibited transactions" within the meaning of ERISA and the Code may result if
the Securities are acquired by an employee benefit plan with respect to which
the Company, Travelers Group or any direct or indirect subsidiary of either is a
party in interest, unless such Securities are acquired pursuant to an applicable
exemption. Any
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<PAGE>
employee benefit plan or other entity subject to such provisions of ERISA or the
Code proposing to acquire the Securities should consult with its legal counsel.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for the Company
by A. George Saks, Esq., General Counsel of the Company, Smith Barney Holdings
Inc., 388 Greenwich Street, New York, New York 10013, or by counsel to be
identified in the Prospectus Supplement. Mr. Saks, Executive Vice President,
General Counsel and Secretary of Smith Barney, beneficially owns, or has rights
to acquire under Travelers Group's employee benefit plans, an aggregate of less
than 1% of Travelers Group Common Stock.
The validity of the Offered Securities will be passed upon for the
underwriters or agents by counsel to be identified in the Prospectus Supplement.
EXPERTS
The consolidated financial statements and financial statement schedules of
the Company as of December 31, 1995 and 1994, and for each of the years in the
three-year period ended December 31, 1995, included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995, have been incorporated
by reference herein, in reliance upon the report (also incorporated by reference
herein) of Coopers & Lybrand L.L.P., independent auditors, and upon the
authority of said firm as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION, OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS, IN CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITER. NEITHER THIS PROSPECTUS SUPPLEMENT NOR THE
PROSPECTUS CONSTITUTES AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO
WHICH IT RELATES IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE
SUCH OFFER IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION CONTAINED IN EITHER
IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
PROSPECTUS SUPPLEMENT
Summary........................................ S-3
Risk Factors................................... S-6
Capitalization................................. S-8
Ratio of Earnings to Fixed Charges............. S-8
Description of Securities...................... S-9
The Index...................................... S-13
Certain United States Federal Income Tax
Considerations............................... S-20
Use of Proceeds and Hedging.................... S-22
Underwriting................................... S-23
Experts........................................ S-24
Legal Opinions................................. S-24
<CAPTION>
PROSPECTUS
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 3
The Company.................................... 3
Ratio of Earnings to Fixed Charges............. 5
Use of Proceeds................................ 5
Description of Securities...................... 5
Plan of Distribution........................... 13
ERISA Matters.................................. 14
Legal Matters.................................. 15
Experts........................................ 15
</TABLE>
Units
Smith Barney
Holdings Inc.
Smith Barney S&P 500
Equity Linked Notes
due , 2002
----
PROSPECTUS SUPPLEMENT
, 1997
(INCLUDING PROSPECTUS
DATED DECEMBER 20, 1996)
-------
Smith Barney Inc.
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