Filed Pursuant to Rule 424(b)(5)
relating to Reg. Stmt. 33-48840
and Reg. Stmt. 33-78424
Indexed Note Pricing Supplement No. 27
dated May 22, 1995 (To Prospectus
dated May 12, 1994 and Prospectus
Supplement dated May 12, 1994)
Rule 424(B)(5)
File No. 33-78424
File No. 33-48840
COLGATE-PALMOLIVE COMPANY
Medium-term Notes - Indexed
Series B
--------------------------------------------------------------------------------
Principal Amount $25,000,000 Trade Date: May 22, 1995
----------- ------------
Issue Price: 100% Original Issue Date: May 31, 1995
------- ------------
Interest Rate: See below. Net Proceeds to Issuer: $24,912,500
--------- -----------
Stated Maturity Date: June 1, 1998 Agent's Discount or Commission: $87,500
------------ -------
--------------------------------------------------------------------------------
Interest Payment Provisions:
No periodic payment of interest will be made with respect to the Nikkei
300 Indexed Notes (the "Nikkei 300 Indexed Notes" or the "Notes").
At the Stated Maturity Date, a beneficial owner of a Note will be entitled
to receive a Redemption Amount in U.S. dollars equal to 100% of the face amount
of the Note (the "Principal Redemption Amount") plus a Supplemental Redemption
Amount equal to the greater of:
i) 3.04% of the face amount of the Note (the "Minimum
Supplemental Redemption Amount"), and
ii) an amount equal to the face amount of the Note
multiplied by a percentage calculated as follows:
_ _
| Final Index Value - Initial Index Value |
114.4% x | --------------------------------------- |
|_ Initial Index Value _|
provided, however, that in no case will such Redemption Amount (calculated as
the sum of the Principal Redemption Amount and the Supplemental Redemption
Amount) be less than 103.04% of the face amount of the Note. The "Initial
Index Value" is 245.92 and the "Final Index Value" is calculated as the
arithmetic average of the closing level of the Nikkei Stock Index 300 on the
first five Index Business Days during a period consisting of six Index Business
Days ending on, and including, May 29, 1998 (the "Calculation Period"), subject
to adjustment in the event of a Market Disruption Event as described in this
Indexed Note Pricing Supplement (the "Indexed Note Supplement").
<PAGE>
Redemption: Colgate-Palmolive Company (the "Company") may not redeem the
Nikkei 300 Indexed Notes prior to the Stated Maturity Date.
Optional Repayment: A beneficial owner may not demand repayment of the Nikkei
300 Indexed Notes prior to the Stated Maturity Date.
Currency:
Specified Currency: U.S. Dollars
Minimum Denominations: U.S. $100,000 or multiples thereof.
Original Issue Discount: [X] Yes [ ] No
Total Amount of OID: 3.04% of the Principal Amount of the Note
Yield to Maturity: 1.00% (calculated on the basis of a 360 day year
consisting of twelve 30-day months)
Initial Accrual Period OID: $0.028 per $1,000 of Notes (calculated from
May 31, 1995 to June 1, 1995)
Form: [X] Book-Entry [ ] Certificated
Depositary: The Depository Trust Company
Calculation Agent: Goldman, Sachs & Co.
Agent acting in the capacity indicated below:
[X] Agent [ ] Principal
If as Principal: N/A
[ ] The Notes are being offered at varying prices related to prevailing
market prices at the time of resale.
[ ] The Notes are being offered at a fixed initial public offering price
of % of principal amount.
If as Agent:
The Notes are being offered at a fixed initial public offering price of
100% of principal amount.
[X] Other Provisions: (see below)
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used by the Company to
retire commercial paper which was issued by the Company to repay commercial bank
borrowings incurred in connection with the Company's acquisition of the
worldwide Kolynos oral care business from American Home Products Corporation on
January 10, 1995. As of March 31, 1995, the Company's outstanding commercial
paper had a weighted average interest rate of 6.15% with maturities ranging from
3 to 90 days.
2
<PAGE>
THE NIKKEI 300 INDEXED NOTES OFFERED HEREBY ARE NOT AN APPROPRIATE INVESTMENT
FOR INVESTORS WHO ARE NOT SOPHISTICATED WITH RESPECT TO EQUITY INDICES, OPTIONS
AND OPTION TRANSACTIONS AND FOREIGN MARKETS.
DESCRIPTION OF NOTES
General
-------
The Nikkei 300 Indexed Notes (the "Notes") of Colgate-Palmolive Company
(the "Company") are being offered at an original issue price of 100% of the
principal amount thereof, will provide for no periodic payments of interest and
will mature on June 1, 1998 (the "Stated Maturity Date"). The Redemption Amount
(as defined) on the Stated Maturity Date will be determined by reference to the
Nikkei Stock Index 300 or a Successor Index (together or as applicable the
"Index" or the "Nikkei 300 Index"), subject to a minimum Redemption Amount
(calculated as the sum of the Principal Redemption Amount and the Supplemental
Redemption Amount) of 103.04% of the face amount of the Notes.
Upon issuance, all Notes will be represented by one or more Global Notes
registered in the name of a nominee of DTC. References herein to the beneficial
owner of a Note shall, so long as the Notes are held in global form by a
Depository, be deemed to be to the owner of a beneficial interest in such Global
Note, and, unless the context otherwise requires, references herein to Notes
shall be deemed to be to beneficial interests in such Global Note. If Notes in
certificated form are physically delivered to the owners of such beneficial
interests, references herein to the beneficial owner of any such Note shall be
deemed to be to the Holder of such Certificated Note and references to the Note
shall be deemed to be to such Certificated Note.
All terms used but not defined herein which are defined in the accompanying
Prospectus or Prospectus Supplement shall have the meanings therein assigned to
them.
The Notes are not redeemable at the option of the Company or repayable at
the option of the beneficial owner prior to maturity and do not provide for any
sinking fund.
Goldman, Sachs & Co. will act as Calculation Agent with respect to the
Notes.
Redemption Amount:
-----------------
Except as provided below, a beneficial owner of a Note will be entitled to
receive, at the Stated Maturity Date, a redemption amount (the "Redemption
Amount") in U.S. dollars equal to 100% of the face amount of the Note (the
"Principal Redemption Amount") plus a Supplemental Redemption Amount equal to
the greater of:
i) 3.04% of the face amount of the Note (the "Minimum Supplemental
Redemption Amount"), and
ii) an amount equal to the face amount of the Note multiplied by a
percentage calculated as follows:
_ _
| Final Index Value - Initial Index Value |
114.4% x | --------------------------------------- |
|_ Initial Index Value _|
provided, however, that in no case will such Redemption Amount (calculated as
the sum of the Principal Redemption Amount and the Supplemental Redemption
Amount) be less than 103.04% of the face amount of the Note.
3
<PAGE>
"Index Business Day" is a day that is (or, but for the existence of a
Market Disruption Event, would have been) a trading day on which the Tokyo
Stock Exchange and the Osaka Securities Exchange are open for business,
other than a day on which trading is scheduled to close prior to the
regular weekday closing time.
"Calculation Period" is the six consecutive Index Business Days ending on,
and including, May 29, 1998.
"Index Sponsor" is Nihon Keizai Shimbun, Inc. ("NKS").
"Initial Index Value" is 245.92.
"Closing Index Value" is the value of the Index at the close of business on
the Tokyo Stock Exchange on any Index Business Day as determined by the
Calculation Agent.
"Final Index Value" will be determined by the Calculation Agent and will
equal the arithmetic average of the Closing Index Values on the first Index
Business Day in the Calculation Period and each successive Index Business
Day up to and including the last Index Business Day in the Calculation
Period (each, a "Calculation Date") until the Calculation Agent has so
determined such Closing Index Values for five Index Business Days.
Notwithstanding the foregoing, if the Calculation Agent determines that a
Market Disruption Event has occurred or is continuing on any Index
Business Day during the Calculation Period, then the Final Index Value
will equal the arithmetic average of the Closing Index Value on each Index
Business Day during the Calculation Period on which a Market Disruption
Event did not occur or is not continuing. If there is a Market Disruption
Event on each of the six Index Business Days during the Calculation Period,
then the Calculation Agent shall determine the Final Index Value as the
market closing value of the Index on the last Index Business Day (subject
to "Index Adjustment" described herein) in accordance with the method for
calculating the Index last in effect prior to the commencement of the
Market Disruption Event using the Tokyo Stock Exchange trade price (or, if
trading in the relevant security has been materially suspended or
materially limited, its good faith estimate of the Tokyo Stock Exchange
trade price that would have prevailed but for that suspension or
limitation) on that sixth Index Business Day of each security comprising
the Index.
Market Disruption Event
-----------------------
Market Disruption Event means the occurrence or existence on any Index
Business Day of:
(i) any suspension of or limitation imposed on trading (by reason of
movement in price exceeding limits permitted by the relevant exchange
or otherwise) on the Tokyo Stock Exchange in securities that comprise
the Index, or on the Osaka Securities Exchange in options and futures
contracts in the Index or securities that comprise the Index if, in
the determination of the Calculation Agent, such suspension or
limitation is material, or
(ii) there shall have occurred any change in national or international
financial, political or economic conditions or currency exchange rates
or exchange controls, the effect of which is, in the judgment of the
Calculation Agent, so material and adverse as to make it impracticable
or inadvisable to proceed with calculation
4
<PAGE>
of the Principal Redemption Amount of the Note on the
terms and in the manner contemplated herein.
For the purpose of determining whether a Market Disruption Event exists at
any time, if trading in a security included in the Index is materially suspended
or materially limited at that time, then the relevant percentage contribution of
the security to the level of the Index shall be based on a comparison of (i) the
portion of the level of the Index attributable to that security relative to (ii)
the overall level of the Index, in each case immediately before that suspension
or limitation.
The Calculation Agent shall as soon as reasonably practicable under the
circumstances notify the Paying Agent and the Company of the existence or
occurrence of a Market Disruption Event on the day that but for the occurrence
or existence of a Market Disruption Event would have been a Calculation Date.
Index Adjustment
----------------
If the Nikkei 300 Index is (i) not calculated and announced by the Index
Sponsor but is calculated and announced by a successor sponsor acceptable to the
Calculation Agent or (ii) replaced by a successor or substitute index (the
"Successor Index") using, in the determination of the Calculation Agent, the
same or a substantially similar formula for a method of calculation as used in
the calculation of the Index, then the index so calculated and announced by that
successor sponsor or that Successor Index, as the case may be, will be deemed to
be the Index for purposes of computing the Principal Redemption Amount.
If (i) on or prior to the final Calculation Date during the Calculation
Period the Index Sponsor makes a material change in the formula for or the
method of calculating the Index or in any other way materially modifies the
Index (other than a modification prescribed in that formula or method to
maintain the Index in the event of changes in constituent stock and
capitalization and other routine events) or (ii) on any Calculation Date
during the Calculation Period the Index Sponsor fails to calculate and
announce the Index, then the Calculation Agent shall calculate the Closing
Index Value or Final Index Value, as the case may be, using, in lieu of a
published level for the Index, the level for that Index as determined by the
Calculation Agent in accordance with the formula for and method of calculating
the Index last in effect prior to that change or failure, but using only those
securities that comprised the Index immediately prior to that change or failure
(other than those securities that have since ceased to be listed on the Tokyo
Stock Exchange).
The following table illustrates for a range of hypothetical Final Index
Values, the percentage change in the Nikkei 300 Index from the Initial Index
Value to the Final Index Value, the corresponding Redemption Amount of the
Notes, and the pre-tax annualized rate of return to Investors.
5
<PAGE>
Redemption Pre-Tax
Hypothetical Percentage Amount of Annualized
Final Index Change Note at Rate of Return
Value in Index (1) Maturity to Maturity (2)
221.33 -10.00% 103.04% 1.00%
233.62 -5.00% 103.04% 1.00%
245.92 0.00% 103.04% 1.00%
258.22 5.00% 105.72% 1.86%
270.51 10.00% 111.44% 3.64%
282.81 15.00% 117.16% 5.34%
295.10 20.00% 122.88% 6.98%
307.40 25.00% 128.60% 8.55%
319.70 30.00% 134.32% 10.07%
331.99 35.00% 140.04% 11.54%
344.29 40.00% 145.76% 12.95%
356.58 45.00% 151.48% 14.32%
368.88 50.00% 157.20% 15.65%
381.18 55.00% 162.92% 16.93%
393.47 60.00% 168.64% 18.18%
405.77 65.00% 174.36% 19.40%
418.06 70.00% 180.08% 20.58%
430.36 75.00% 185.80% 21.73%
_____________________
(1) Percentage change of hypothetical Final Index Value relative to the Initial
Index Value.
(2) Pre-tax annualized rate of return from May 31, 1995 to the Stated Maturity
Date is calculated on the basis of a 360 day year consisting of twelve 30
day months.
The above figures are for purposes of illustration only. The actual Redemption
Amount of the Notes and the pre-tax annualized rate of return represented
thereby will depend entirely upon the actual Final Index Value determined by the
Calculation Agent as provided herein.
Events of Default and Acceleration
----------------------------------
In case an Event of Default with respect to the Notes shall have occurred
and be continuing, the amount payable to a beneficial owner of a Note upon any
acceleration permitted by the Notes, will be equal to the amount that would be
payable as though the Stated Maturity Date of the Notes was the date on which
early repayment is due, and the Final Index Value was calculated based on the
Closing Index Value of the Index on the date of early repayment, or the first
succeeding Index Business Day in the event that the date of early repayment is
not an Index Business Day. If a bankruptcy proceeding is commenced in respect
of the Company, the claim of the beneficial owner of a Note may be limited,
under Section 502(b)(2) of Title 11 of the United States
6
<PAGE>
Code, to the amount of the Note that would be due if the Stated Maturity Date of
the Notes were the date of the commencement of the proceeding.
SPECIAL CONSIDERATIONS
Payment at Maturity
-------------------
Redemption Amount of Notes. In all cases, except as provided below, if the
---------------------------
Final Index Value is equal to or less than the product of i) 102.66% and ii) the
Initial Index Value, a beneficial owner of the Notes will be entitled to receive
only 103.04% of the face amount of such Notes at the Stated Maturity, which is
equal to 100% of the face amount of such Notes plus the Minimum Supplemental
Redemption Amount. This will be true even though the value of the Index as of
some interim date or date prior to the end of the Calculation Period may have
exceeded the Initial Index Value because the Redemption Amount payable on the
Notes is calculated based on the Final Index Value only.
Time Value of Money. No current interest payments will be made on the
--------------------
Notes. The minimum Redemption Amount to be received by beneficial owners of the
Notes at the Stated Maturity Date reflects a 1% annualized minimum return,
assuming semi-annual compounding calculated on the basis of a 360 day year
consisting of twelve 30 day months. Such 1% minimum return 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
Notes. The minimum Redemption Amount to be received at the Stated Maturity
Date is not expected to reflect the full opportunity cost implied by inflation
and other factors relating to the time value of money.
Redemption Amount of the Notes Does Not Reflect Dividends Paid on the
---------------------------------------------------------------------
Index. The Redemption Amount is calculated based only on the price appreciation,
------
if any, of the Index. Because the Redemption Amount calculation does not
account for the payment of dividends on the individual stocks comprising the
Index, the yield to maturity of the Notes may produce a lower yield than if
such stocks underlying the Index were purchased and held for a similar period.
Effective Fixed Exchange Rate
-----------------------------
Because the Redemption Amount of the Notes is calculated in U.S. dollars
based on the percentage price appreciation of the Index, the Redemption Amount
of the Notes will not be directly affected by the actual Yen/US$ exchange rate
prevailing at the Stated Maturity Date. Therefore, while the investor is
protected against any decrease in value that would be realized by owning the
stocks underlying the Index outright if the Yen depreciates against the U.S.
dollar, the investor does not realize any benefit if the Yen appreciates against
the U.S. dollar.
Trading
-------
The Notes have not been approved for listing on any stock exchange and the
Company has no intention of seeking a listing for the Notes in the future.
Investors should be aware that there is no precedent to indicate how the Notes
will trade in the secondary market or whether such market will be liquid.
Goldman, Sachs & Co. has advised the Company that it intends to make a market in
the Notes. However, Goldman, Sachs & Co. is under no obligation to do so and
may discontinue market making activities at any time. It is expected that the
secondary market for the Notes will be affected by a number of factors
independent of the creditworthiness of the Company.
The trading values of the Notes may be affected by a number of interrelated
factors, including, but not limited to, those listed below. The relationship
among these factors is complex. Accordingly, investors should be aware that
7
<PAGE>
factors other than the level of the Index are likely to affect their trading
value. The likely effect on the trading value of the Notes of each of the
factors listed below, assuming in each case that all other factors are held
constant, is as follows:
Price Appreciation of Index. The trading value of the Notes will likely
----------------------------
depend primarily on the extent of the appreciation, if any, of the Index over
the Initial Index Value. If, however, the Notes are sold prior to the Stated
Maturity Date at a time when the Index exceeds the Initial Index Value, the sale
price may be at a discount from the amount which would be payable to the holder
if such excess of the Index over the Initial Index Value were to prevail until
the end of the Calculation Period because of the possible fluctuations of the
Index between the time of such sale and the end of the Calculation Period. The
Japanese equity market has been highly volatile during the recent past.
Furthermore, the price at which a holder will be able to sell the Notes prior to
the Stated Maturity Date may be at a discount, which could be substantial, from
the minimum Redemption Amount thereof (which is the sum of the Principal
Redemption Amount and the Minimum Supplemental Redemption Amount), if, at such
time, the Index is below, equal to or not sufficiently above the Initial Index
Value.
Volatility of the Index. If the volatility of the Index increases, the
------------------------
trading value of the Notes would likely increase. If the volatility of the
Index decreases, the trading value of the Notes would likely decrease.
U.S. Dollar Interest Rates. If U.S. interest rates increase, the value of
---------------------------
the Notes would likely decrease. If U.S. interest rates decrease, the value of
the Notes would likely increase.
Japanese Yen Interest Rates. If Japanese Yen interest rates increase, the
----------------------------
value of the Notes would likely increase. If Japanese Yen interest rates
decrease, the value of the Notes would likely decrease.
Dividend Rates in Japan. If dividend rates on the stocks comprising the
------------------------
Index increase, the value of the Notes would likely decrease. If dividend
rates on the stocks comprising the Index decrease, the value of the Notes would
likely increase.
Correlation Between Yen/US$ Foreign Exchange Rate and the Index.
----------------------------------------------------------------
If the correlation between the Yen/US$ exchange rate and the Index becomes more
positive (or less negative), the value of the Notes would likely increase. If
the correlation becomes more negative (or less positive), the value of the Notes
would likely decrease. Correlation refers to the statistical correlation of the
Yes/US$ exchange rate (expressed in Yen per one U.S. dollar) and the price of
the Index.
Time Remaining to Maturity. The Notes may trade at a value above that
---------------------------
which may be inferred from the level of interest rates and the Index. This
difference would reflect a "time premium" due to expectations concerning the
value of the Index during the period prior to the end of the Calculation
Period of the Notes. As the time remaining to the Calculation Date of the
Notes decreases, however, this time premium will likely decrease, thus
decreasing the trading value of the Notes.
General Factors Affecting the U.S. and Japanese Economies
---------------------------------------------------------
Investors should also consider factors affecting the U.S. and Japanese
economies. Although the Redemption Amount of the Notes will be calculated using
a fixed Yen/US$ exchange rate, the Yen/US$ exchange rate may affect economic and
political developments in Japan and other countries which, in turn, may affect
the value of the Index. Exchange rates of most economically developed
noncommunist nations, including Japan, are permitted to fluctuate in
8
<PAGE>
value relative to the U.S. dollar. National governments, however, may not allow
their currencies to float freely in response to economic forces. Sovereign
governments in fact use a variety of techniques, such as intervention by a
country's central bank or imposition of regulatory controls or taxes, to affect
the exchange rates of their currencies. Of particular importance are rates of
inflation, interest rate levels, the balance of payments and the extent of
governmental surpluses or deficits in Japan and the United States, all of which
are in turn sensitive to the monetary, fiscal and trade policies pursued by the
governments of Japan, the United States and other countries important to
international trade and finance. Governments may also issue a new currency to
replace an existing currency or alter the exchange rate or relative exchange
characteristics by devaluation or revaluation of a currency.
The likely effect of the foregoing factors on the trading value of the
Notes is complex. The factors affect not only the value of the fixed-income
component of the Note, but also the value of the embedded option which would
generally be calculated using option pricing models. Each of the factors are
interrelated. No single factor should be viewed in isolation and, in fact,
changes in one or more of the factors listed may have indirect effects on
other factors. In addition, no assessment has been made as to the likely
magnitude of any change in the trading value of the Notes resulting from a
change in one or more of the factors.
Discretion of Calculation Agent
-------------------------------
Goldman, Sachs & Co., in its capacity as Calculation Agent, has been
granted certain discretionary powers to determine the value of the Index in
the event of a Market Disruption Event or in the event that the Index Sponsor
ceases to publish the Index. As such, the decisions of the Calculation Agent
may influence the Redemption Amount of the Notes, but in no event will the
Redemption Amount (calculated as the sum of the Principal Redemption Amount and
the Supplemental Redemption Amount) be less than 103.04% of the face amount of
any Note. Goldman Sachs International, an affiliate of Goldman, Sachs & Co.,
has also provided a hedge to the Company against its exposure to price movements
in the Index in connection with the Notes.
Certain Federal Income Tax Considerations
-----------------------------------------
Prospective investors should also consider the tax consequences of
investing in the Notes. The Company will take the position that a Note will
be treated for United States federal income tax purposes as having been issued
with original issue discount which a beneficial owner who is a United States
person will be required to include in income over the term of the Note before
the receipt of cash attributable to such income. See "Certain Federal Income
Tax Considerations" in this Indexed Note Supplement.
NIKKEI 300 INDEX
Summary of the Index
--------------------
The Nikkei 300 Index is an index calculated, published and disseminated by
Nihon Keizai Shimbun, Inc. ("NKS"), that measures the composite price
performance of stocks of 300 Japanese companies. All 300 stocks are listed in
the First Section of the Tokyo Stock Exchange ("TSE"). Stocks listed in the
First Section are among the most actively traded stocks on the TSE. Publication
of the Nikkei 300 Index began on October 8, 1993.
The Nikkei 300 Index is a market capitalization-weighted index which is
calculated by (i) multiplying the per share price of each stock included in the
Nikkei 300 Index by the number of outstanding shares (excluding shares
9
<PAGE>
held by the Japanese Government), (ii) calculating the sum of all these products
(such sum being hereinafter referred to as the "Aggregate Market Price"), (iii)
dividing the Aggregate Market Price by the Base Aggregate Market Price (i.e. the
Aggregate Market Price as of October 1, 1982) and (iv) multiplying the result by
100. Larger companies' shares have a larger effect on moving the entire index
than smaller companies' shares.
Although the Nikkei 300 Index was first published in October 1993, NKS has
calculated values for the Nikkei 300 Index for the period from October 1, 1982
through October 8, 1993. The stocks included in the Nikkei 300 Index (such
stocks being hereinafter referred to as the "Underlying Stocks") were selected
from a reference group of stocks which were selected by excluding stocks listed
in the First Section of the TSE that have relatively low market liquidity or
extremely poor financial results. The Underlying Stocks were selected from this
reference group by (i) selecting from the remaining stocks in this reference
group the stocks with the largest aggregate market value in each of 36
industrial sectors and (ii) selecting additional stocks (with priority within
each industrial sector given to the stock with the largest aggregate market
value) so that the selection ratios (i.e. the ratio of the aggregate market
value of the included stocks to that of the stocks in the reference group) with
respect to all 36 industry sectors will be as nearly equal as possible and the
total number of companies with stocks included in the Nikkei 300 Index will be
300.
In order to maintain continuity in the level of the Nikkei 300 Index, the
Nikkei 300 Index will be reviewed annually at the beginning of October by NKS
and the Underlying Stocks may be replaced, if necessary, in accordance with the
"deletion/addition rule". The "deletion/addition" rule provides generally for
the deletion of a stock from the Nikkei 300 Index if such stock is no longer
included in the reference group or if the aggregate market value of such stock
is low relative to other stocks in the relevant industry sector. Stocks deleted
pursuant to the "deletion/addition" rule will be replaced by stocks included in
the reference group which have relatively high aggregate market values. In
addition, stocks may be added or deleted from time to time for extraordinary
reasons.
The Index is computed once a day after the close of the market after
October 12, 1993. The Index is calculated minute by minute by QUICK Corp.
from January 31, 1994. The Index is published in the Nihon Keizai Shimbun
morning and evening editions as well as through electronic services such as
Nikkei Telecom.
All rights, including copyright and intellectual property rights, in the
name "Nikkei" and the "Nikkei 300 Index" belong to NKS. NKS has the right to
amend the contents, and to suspend the publication of the Nikkei 300 Index.
The information included herein with respect to the Nikkei 300 Index
consists only of extracts from, or summaries of, information published by NKS.
Goldman, Sachs & Co. and the Company only accept responsibility that such
information has been correctly extracted or summarized but do not accept
responsibility in respect of the accuracy or the completeness of the
information set forth herein concerning the Index, or that there has not
occurred any event which would affect the accuracy or completeness of such
information.
NKS does not intend by this document to offer or solicit to buy or sell any
securities. NKS, its clients and officers may have a position or engage in
transactions in any of the securities mentioned.
All disclosure contained in this Indexed Note Supplement regarding the
Nikkei 300 Index or its publisher, NKS, is derived from publicly available
information. NKS has no relationship with the Company or the Notes; it does
10
<PAGE>
not sponsor, endorse, authorize, sell or promote the Notes and has no obligation
or liability in connection with the administration, marketing or trading of the
Notes.
NKS makes no warranty expressly or impliedly as to the merchantability or
fitness for a particular purpose of the Index or any product or securities
described in this document ("the products") and is not responsible for the
construction or operation of the products or for the performance of or for any
error in the Index or the products nor is under any obligation to advise any
person of any error in the Indices or the products. NKS does not give any
assurance regarding the continued calculation or publication of the Index or any
changes in the constituents or in the methodology used in its calculation.
Historical Data on the Nikkei 300 Index
The following table sets forth the closing values of the Nikkei 300 Index
for each quarter in the period from January 1, 1990 through March 30, 1995, as
published on Bloomberg. The recent historical experience of the Nikkei 300
Index should not be taken as in indication of future performance and no
assurance can be given that the value of the Nikkei 300 Index will not decline
and thereby reduce the value of the Supplemental Redemption Amount which may be
payable to holders of Notes at maturity or otherwise.
Index
Closing
Value
-------
1990
1st Quarter . . . . . . . . . 395.83
2nd Quarter . . . . . . . . . 417.76
3rd Quarter . . . . . . . . . 283.76
4th Quarter . . . . . . . . . 310.32
1991
1st Quarter . . . . . . . . . 347.60
2nd Quarter . . . . . . . . . 315.19
3rd Quarter . . . . . . . . . 322.64
4th Quarter . . . . . . . . . 300.23
1992
1st Quarter . . . . . . . . . 254.18
2nd Quarter . . . . . . . . . 226.03
3rd Quarter . . . . . . . . . 235.83
4th Quarter . . . . . . . . . 237.58
1993
1st Quarter . . . . . . . . . 262.94
11
<PAGE>
2nd Quarter . . . . . . . . . 283.39
3rd Quarter . . . . . . . . . 293.04
4th Quarter . . . . . . . . . 267.06
1994
1st Quarter . . . . . . . . . 285.73
2nd Quarter . . . . . . . . . 304.62
3rd Quarter . . . . . . . . . 288.39
4th Quarter . . . . . . . . . 287.17
1995
1st Quarter . . . . . . . . . 241.99
The official closing value of the Nikkei 300 Index on May 19, 1995 was
240.88 as quoted by Bloomberg.
LICENSE AGREEMENT
NKS and Goldman Sachs International have entered into a license agreement
providing for the license to Goldman Sachs International, in exchange for a
fee, of the right to use indices owned and published by NKS in connection with
certain securities, including the Notes, and the Company is an authorized
sublicensee thereof.
CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS
The following is a summary of certain United States federal tax
considerations of the ownership and disposition of the Notes. The discussion
below deals only with Notes held as capital assets and does not purport to
deal with persons in special tax situations, such as financial institutions,
insurance companies, regulated investment companies, dealers in securities or
currencies, persons holding Notes as a hedge against currency risks or as a
position in a "straddle" for tax purposes. It also does not deal with
secondary purchasers and non-U.S. holders. Persons considering the purchase
of the Notes should consult their own tax advisors concerning the application
of the United States Federal income tax laws to their particular situations as
well as any consequences of the purchase, ownership and disposition of the
Notes arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a beneficial owner of a Note that is not a U.S. Holder.
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There are no statutory provisions, regulations (except the Proposed
Regulations as described below), published rulings or judicial decisions
involving the characterization, for United States Federal income tax purposes,
of securities with terms substantially the same as the Notes. However, although
the matter is not free from doubt, under current law, each Note should be
treated as a debt instrument of the Company for United States Federal income tax
purposes. The Company currently intends to treat each Note as a debt instrument
of the Company for United States Federal income tax purposes and, where
required, intends to file information returns with the Internal Revenue Service
("IRS") in accordance with such treatment, in the absence of any change or
clarification in the law, by regulation or otherwise, requiring a different
characterization. The following discussion of the principal United States
Federal income tax consequences of the purchase, ownership and disposition of
the Notes is based upon the assumption that each Note will be treated as a debt
instrument of the Company for the United States Federal income tax purposes.
Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument generally will be taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). Despite the foregoing, nonperiodic noncontingent payments of
interest on a debt instrument generally will be treated as original issue
discount and will be includible in income by a U.S. Holder as ordinary interest
as it accrues over the entire term of the debt instrument under a constant yield
method in advance of receipt of the cash payments attributable to such income,
regardless of the U.S. Holder's regular method of tax accounting. Under these
principles, the Minimum Supplemental Redemption Amount (i.e., a non-periodic
noncontingent payment of interest) generally will be treated as original issue
discount for United States Federal income tax purposes and will be includible in
income by a U.S. Holder as ordinary interest as it accrues over the entire term
of the Note under a constant yield method in advance of receipt of the
Supplemental Redemption Amount, regardless of the U.S. Holder's regular method
of tax accounting. Under these same principles, the excess of the Supplemental
Redemption Amount over the Minimum Supplemental Redemption Amount, if any, would
be treated as contingent interest and generally would be includible in income by
a U.S. Holder as ordinary interest on the date that the Supplemental Redemption
Amount is accrued (i.e., determined) or when such amount is received (in
accordance with the U.S. Holder's regular method of tax accounting).
Upon the sale, exchange or retirement of a Note, a U.S. Holder generally
would recognize taxable gain or loss in an amount equal to the difference, if
any, between the amount realized on the sale, exchange or retirement (i.e., the
sum of the Note's stated principal amount and the Minimum Supplemental
Redemption Amount in the case of retirement) and such U.S. Holder's adjusted tax
basis in the Note. A U.S. Holder's adjusted tax basis in a Note generally will
equal such U.S. Holder's initial investment in the Note increased by any
original issue discount included in income by such U.S. Holder with respect to
the Note. Such gain or loss generally would be long-term capital gain or loss
if the Note were held by the U.S. Holder for more than one year. It is possible,
however, that the IRS could assert that any amounts realized upon the sale or
exchange of a Note prior to maturity in excess of the Note's adjusted issue
price as of the date of disposition (i.e., the Note's stated principal amount
increased by any previously accrued original issue discount with respect to
the Note) constitutes ordinary interest income (subject to the bond premium
rules, as discussed below). Nonetheless, although the matter is not free from
doubt, under current law, any gain realized upon the sale or exchange of a Note
prior to maturity should be treated entirely as capital gain (subject to the
market discount rules, as discussed below).
13
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Prospective investors in the Notes should also be aware that on December
16, 1994, the Treasury Department issued proposed regulations (the "Proposed
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments such as the Notes. The Proposed
Regulations, however, are proposed to apply only to debt instruments issued 60
days or more after the date on which the Proposed Regulations are published as
final Treasury regulations. Accordingly, if ultimately adopted in their current
form, the Proposed Regulations would not apply to the Notes. Furthermore,
proposed Treasury regulations are not binding upon either the IRS or taxpayers
prior to becoming effective as temporary or final regulations. In general, if
ultimately adopted in their current form, the Proposed Regulations would cause
the timing and character of income, gain or loss reported on a contingent
payment debt instrument to substantially differ from the timing and character of
income, gain or loss reported on a contingent payment debt instrument under
general principles of current United States Federal income tax law (as described
above). Prospective investors in the Notes are urged to consult their own tax
advisers concerning the effect, if any, of the Proposed Regulations on their
investment in the Notes.
Based upon the current state of the law, the Company, where required,
currently intends to file information returns with the IRS treating each Note as
a debt instrument of the Company for United States Federal income tax purposes
(as discussed above) and reporting noncontingent interest and contingent
interest, if any, on and gross proceeds received upon the sale, exchange or
retirement of each Note in accordance with general principles of current United
States Federal income tax law (as described above), in the absence of any change
or clarification in the law, by regulation or otherwise.
_______________________________________
IT IS SUGGESTED THAT PROSPECTIVE INVESTORS WHO CONSIDER PURCHASING THE NOTES
SHOULD BE EXPERIENCED WITH RESPECT TO EQUITY INDICES, OPTIONS AND OPTION
TRANSACTIONS AND FOREIGN MARKETS AND REACH AN INVESTMENT DECISION ONLY AFTER
CAREFULLY CONSIDERING, WITH THEIR ADVISERS, THE SUITABILITY OF THE NOTES IN THE
LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
Citicorp Securities, Inc.
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X Goldman, Sachs & Co.
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Lazard Freres & Co. LLC
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Merrill Lynch & Co.
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J.P. Morgan Securities Inc.
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14
