<PAGE>
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 9, 1995)
$140,000,000
[CORPORATE LOGO] ANHEUSER-BUSCH COMPANIES, INC.
MEDIUM-TERM NOTES
----------
Due from Nine Months to 30 Years from Date of Issue
----------
The Company may offer from time to time up to $140,000,000 aggregate
principal amount of its Medium-Term Notes (the "Notes") or its equivalent in a
specified currency or composite currency. The Notes will mature on any
business day from nine months to thirty years from the date of issue, as
selected by the purchaser and agreed to by the Company.
The Notes may be denominated in United States dollars or in such foreign
currencies or composite currencies as may be specified by the Company at the
time of offering. The specific currency or composite currency, interest rate
or manner of calculating the interest rate, issue price and maturity date of
any Note will be set forth in the related pricing supplement to this Prospectus
Supplement. See "Description of Notes".
Unless otherwise specified in the related pricing supplement, interest on
the Fixed Rate Notes will be payable on each March 1 and September 1 and at
maturity. Interest on the Floating Rate Notes will be payable on the dates
specified thereon and in the related pricing supplement.
Unless otherwise specified in the related pricing supplement, the Notes
will not be redeemable or repayable prior to their stated maturity. If so
specified in the pricing supplement, the Notes will be redeemable at the option
of the Company and/or repayable at the option of the Holder at the times and
the redemption or repayment prices specified in the pricing supplement.
The Notes will be issued as Book-Entry Notes or in definitive form in
minimum denominations of $1,000 and integral multiples of $1,000 in excess
thereof or, in the case of Notes denominated in a specified currency or
composite currency, in denominations as specified in the related pricing
supplement. For Book-Entry Notes, a global Note will be registered in the name
of the nominee of The Depository Trust Company, which will act as Depositary,
or in the name of the Depositary. Beneficial interests in Book-Entry Notes
will be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary and its participants. Except as described herein
under "Description of Notes Book-Entry Notes", owners of beneficial interests
in a global Note will not be considered the Holders thereof and will not be
entitled to receive physical delivery of Notes in definitive form.
----------
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, THE PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
<TABLE>
<CAPTION>
Price to Agents' Proceeds to
Public <F1> Commission <F2> Company <F3>
----------- --------------- ------------
<S> <C> <C> <C>
Per Note 100% .125% - .750% 99.875% - 99.250%
Total <F4> $140,000,000 $175,000 - $1,050,000 $139,825,000 - $138,950,000
<FN>
<F1>
The Notes will be sold at 100% of the principal amount thereof unless otherwise
agreed to by the Company and specified in the pricing supplement attached
hereto.
<F2>
The Company will pay a commission to each Agent of from .125% to .750% of the
principal amount of any Note, depending upon the maturity of the Note, sold to
the purchaser solicited by such Agent.
<F3>
Assuming Notes are issued at 100% of their principal amount and before
deducting expenses payable by the Company estimated at $100,000.
<F4>
Or the equivalent thereof in a specified currency or composite currency.
</FN>
</TABLE>
No termination date for the offering has been established. Offers to
purchase Notes are being solicited, on a reasonable best efforts basis, from
time to time by the Agents on behalf of the Company as set forth under "Plan of
Distribution". Notes may be sold to one or more of the Agents on their own
behalf at negotiated discounts. The Company reserves the right to sell Notes
directly on its own behalf or through other agents or underwriters. The
Company or the Agents may reject any order in whole or in part. The Agents
are:
Dillon, Read & Co. Inc.
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Morgan Stanley & Co.
Incorporated
-------------------------
The date of this Prospectus Supplement is February 9, 1995.
<PAGE>
IN CONNECTION WITH FIXED PRICE OFFERINGS OF THE NOTES, THE AGENTS MAY
OVERALLOT OR EFFECT TRANSACTIONS IN THE NOTES WITH A VIEW TO STABILIZING OR
MAINTAINING THE MARKET PRICES OF THE NOTES AT LEVELS OTHER THAN THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED
IN ANY OVER-THE-COUNTER MARKET OR OTHERWISE AND, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
----------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT (INCLUDING THE RELATED PRICING SUPPLEMENT) AND THE
ACCOMPANYING PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE AGENTS. THIS PROSPECTUS SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER BY THE COMPANY OR BY THE
AGENTS TO SELL SECURITIES IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL FOR
THE COMPANY OR THE AGENTS TO MAKE SUCH OFFER IN SUCH STATE. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
----------
DESCRIPTION OF NOTES
GENERAL
The Notes offered hereby by Anheuser-Busch Companies, Inc. (the "Company")
are to be issued under an Indenture dated as of September 1, 1992 (the
"Indenture") between the Company and Chemical Bank, as trustee (the "Trustee"),
which is more fully described in the accompanying Prospectus under "Description
of Debt Securities." In accordance with the Indenture, the Company has adopted
and delivered to the Trustee an Authorizing Resolution providing for the
issuance of Notes from time to time, having such terms as are specified in
respect of each issuance of Notes (an "Issue") in accordance with the
procedures set forth in such Authorizing Resolution. Under such Authorizing
Resolution, an aggregate of $140,000,000 principal amount of Notes may be
offered from time to time under this Prospectus Supplement.
The provisions set forth below will apply to each Note unless otherwise
indicated in the related pricing supplement which will be attached to the cover
of this Prospectus Supplement. Certain capitalized terms used herein are
defined below under "Definitions of Terms". Other capitalized terms used
herein, not otherwise defined, have the meanings given in the Indenture.
The Notes will be issued in fully registered, definitive form or in the
form of a single Note representing an entire Issue, in which ownership
interests will be held in book-entry form (see "Book-Entry Notes" below).
Unless otherwise indicated in the related pricing supplement, the Notes of each
Issue will be denominated in United States dollars, and Notes denominated in
United States dollars will be issued in denominations of $1,000 and integral
multiples of $1,000 in excess thereof. The Notes may also be issued in other
Specified Currencies (including composite currencies) and in other Authorized
Denominations, as may be specified in the related pricing supplement.
The Notes will mature on any Market Day from nine months to 30 years from
the date of issue, as selected by the purchaser and agreed to by the Company.
<PAGE>
The Notes will bear interest from the date of issue to maturity or, if
applicable, until redemption or repayment, at the rate specified in or
calculated as indicated in the related pricing supplement. See "Interest on the
Notes" below.
Repayment at the Option of the Holder. If so specified in the related
pricing supplement, a Note will be subject to repayment at the option of the
Holder in accordance with the terms of the Note on the Optional Repayment Dates
set forth in the related pricing supplement and in the Note. If no Optional
Repayment Date is indicated for a Note, it will not be repayable at the option
of the Holder prior to maturity. On any Optional Repayment Date, it will be
repayable in whole or in part in increments of $1,000 (provided that, if
redeemed in part, any remaining principal amount will be at least $1,000) at
the option of the Holder at 100% of the principal amount to be repaid plus
accrued interest to the date of repayment, on notice of not more than 60 nor
less than 30 days prior to the Optional
S-2
Repayment Date. For Notes denominated in currencies other than United States
dollars, increments for such optional repayment will be specified in the
related pricing supplement.
Sinking Fund; Redemption at the Option of the Company. Unless otherwise
indicated in the related pricing supplement, the Notes will not have a sinking
fund. If so specified in the related pricing supplement, a Note will be
subject to redemption by the Company on and after the Initial Redemption Date
set forth therein and in the Note. Unless otherwise indicated in the related
pricing supplement, the Notes will not be redeemable prior to maturity. On and
after the Initial Redemption Date, if any, Notes will be redeemable in whole or
in part in increments of $1,000 (provided that, if redeemed in part, any
remaining principal amount will be at least $1,000) at the option of the
Company at a Redemption Price determined as described in the following
paragraph, plus accrued interest to the date of redemption, on notice of not
more than 60 nor less than 30 days prior to the date of redemption. For Notes
denominated in currencies other than United States dollars, increments for such
optional redemption will be specified in the related pricing supplement.
Optional Redemption Prices. The Redemption Price for each Note subject to
redemption at the option of the Company will initially be a percentage (the
"Initial Redemption Percentage") of the principal amount to be redeemed and may
decline at each anniversary of the Initial Redemption Date for such Note by a
percentage (the "Annual Redemption Percentage Reduction") of the principal
amount to be redeemed until the Redemption Price is 100% of the principal
amount. The Initial Redemption Percentage and any Annual Redemption Percentage
Reduction applicable to a Note will be set forth in the related pricing
supplement and in the Note.
Transfers of Notes. Transfers of Notes, other than Book-Entry Notes, will
be registrable, and such Notes will be exchangeable, at the office of the
Trustee in New York, New York designated for such purpose. For information
concerning transfers of interests in Book-Entry Notes, see "Book-Entry Notes"
below.
INTEREST ON THE NOTES
Unless otherwise indicated in the related pricing supplement, the Notes
will be issued as Fixed Rate Notes. Notes may also be issued, as indicated in
<PAGE>
the related pricing supplement, as Floating Rate Notes, which may be Commercial
Paper Rate Notes, Prime Rate Notes, LIBOR Notes, Treasury Rate Notes, CD Rate
Notes, CMT Rate Notes or Federal Funds Rate Notes or which may bear interest on
any other variable rate basis specified in the related pricing supplement, or
as Indexed Notes or Amortizing Notes. Each Note will bear interest from its
date of issue or from the most recent Interest Payment Date to which interest
on such Note has been paid or duly provided for until the principal thereof is
paid or made available for payment. Interest will be payable on each Interest
Payment Date and at maturity as specified below under "Payment of Principal and
Interest".
The related pricing supplement for each Issue of Notes will set forth the
fixed interest rate for a Fixed Rate Note, will specify the index pursuant to
which the interest on an Indexed Note will be computed or will specify the
manner of calculating the rate of interest on a Floating Rate Note, which will
include, as applicable, the Interest Rate Basis, the Spread, the Spread
Multiplier, the maximum and/or minimum interest rates, the Regular Record
Dates, the Interest Payment Dates, the Initial Interest Rate, the Index
Maturity, the Interest Reset Dates, the Interest Determination Dates and the
Calculation Dates, as well as any other provisions relating to the calculation
of interest which may differ from the provisions set forth in this Prospectus
Supplement.
The rate of interest on each Floating Rate Note will be reset
periodically. Generally, interest rates applicable to Floating Rate Notes are
determined by the Calculation Agent on the Calculation Date, and are based on
the applicable Interest Rate Basis as of the Interest Determination Date. The
new interest rate becomes effective as of the Interest Reset Date (although the
actual Calculation Date may be later than the Interest Reset Date).
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate which will become effective on the next Interest Reset Date for
such Holder's Note. The Calculation Agent's determination of any interest rate
will be final and binding in the absence of manifest error.
PAYMENT OF PRINCIPAL AND INTEREST
Unless otherwise specified in the related pricing supplement, payments of
principal of (and premium, if any) and interest on all Notes will be made in
the applicable Specified Currency, provided, however, that payments of
principal of (and premium, if any) and interest on Notes denominated in other
than United States dollars will nevertheless be made in United States dollars
(i) at the option of the Holders thereof under the procedures described in the
two following paragraphs and (ii) at the option of the Company in the case of
imposition of exchange controls or other circumstances beyond the control of
the Company as described in the next to last paragraph under this heading.
S-3
If so specified in the related pricing supplement, and except as provided
in the next paragraph, payments of principal of (and premium, if any) and
interest on the Notes denominated in a Specified Currency other than United
States dollars will be made in United States dollars if the registered Holder
has transmitted a written request for such payment to the Trustee at its
Corporate Trust Office in New York, New York on or prior to the applicable
Regular Record Date or the date 15 calendar days prior to maturity. Such
request may be in writing (mailed or hand delivered) or by cable or telex or by
<PAGE>
other form of facsimile transmission acceptable to the Trustee. Any such
request by a Holder will remain in effect with respect to any further payments
on such Note payable to such Holder, unless revoked on or prior to the relevant
Regular Record Date or the date 15 calendar days prior to maturity. Holders of
Notes denominated in Specified Currencies other than United States dollars
whose Notes are registered in the name of a broker or nominee should contact
such broker or nominee to determine whether and how an election to receive
payments in United States dollars may be made.
The United States dollar amount to be received by a Holder of a Note
denominated in other than United States dollars who elects to receive payment
in United States dollars will be based on the Exchange Rate determined by the
Exchange Rate Agent on the second Business Day preceding the payment date for
the aggregate amount of the Specified Currency payable to all Holders of Notes
electing to receive United States dollar payments. If the Exchange Rate is not
determinable on such second Business Day, the payment in question will be made
in the Specified Currency. All currency exchange costs associated with any
payment in United States dollars on any such Note will be borne by the Holder
by deductions from such payment.
Interest will be payable to the person in whose name a Note is registered
at the close of business on the Regular Record Date next preceding each
Interest Payment Date, except that interest payable at maturity will be payable
to the person to whom principal is payable. The first payment of interest on
any Note originally issued between a Regular Record Date and an Interest
Payment Date will be made on the Interest Payment Date following the next
succeeding Regular Record Date to the registered owner on such next succeeding
Regular Record Date.
Payments of interest on any Note will include interest accrued to but
excluding the Interest Payment Date. For a Floating Rate Note, accrued
interest from the date of issue or from the last date to which interest has
been paid is calculated by multiplying the face amount by an accrued interest
factor. Such accrued interest factor is computed by adding the interest factor
calculated for each day from the date of issue, or from the last date to which
interest has been paid, to but excluding the date for which accrued interest is
being calculated. The interest factor for each day is computed by dividing the
interest rate for such date by 360, in the case of Commercial Paper Rate Notes,
Prime Rate Notes, LIBOR Notes, CD Rate Notes, CMT Rate Notes and Federal Funds
Rate Notes, or by the actual number of days in the year in the case of Treasury
Rate Notes. Interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months.
Any payment on any Note due on any day which is not a Business Day in New
York, New York (or in the case of any Note denominated in a Specified Currency
other than United States dollars, which is not a Business Day in the country
issuing the Specified Currency (or, in the case of ECUs, Brussels)), need not
be made on such day, but may be made on the next Business Day with the same
force and effect as if made on the due date, and no interest will accrue for
the period from and after such date (except that, for LIBOR Notes, if such
Business Day is in the next month, interest will be paid on the preceding
Business Day).
Payment of the principal of (and premium, if any) and interest on any Note
at maturity to be made in United States dollars will be made in immediately
available funds upon surrender of such Note at the Corporate Trust Office of
the Trustee in New York, New York. Payments of interest to be made in United
States dollars other than at maturity will be made by check mailed to the
<PAGE>
address of the Person entitled thereto as it appears in the Security Register
or by wire transfer to such account as may have been appropriately designated
by such Person.
Unless otherwise specified in the related pricing supplement, payments on
any Note to be made in a Specified Currency other than United States dollars
will be made by wire transfer to such account with a bank located in the
country issuing the Specified Currency (or, with respect to Notes denominated
in ECUs, Brussels) or other jurisdiction acceptable to the Company and the
Trustee as has been designated at least five Business Days prior to the
Interest Payment Date or stated maturity by the registered Holder, provided,
that, in the case of payment of principal of (and premium, if any) and interest
due at maturity, the Note is presented to the Trustee in time for the Trustee
to make such payments in such funds in accordance with its normal procedures.
Such designation will be made by filing the appropriate information with the
Trustee at its Corporate Trust Office in New York, New York, and, unless
revoked, any such designation made with respect to any Note by a registered
Holder will remain in effect with respect to any further payments with respect
to such Note payable to such Holder. If a payment with respect to any such
Note cannot be made by wire transfer because the required designation has not
been received by the Trustee on or before the requisite date or for any other
reason, a notice will be mailed to the Holder at its registered address
requesting a designation pursuant to which such wire transfer can be made and,
upon the Trustee's receipt
S-4
of such a designation, payment will be made within five Business Days. The
Company will pay any administrative costs imposed by banks in connection with
making payments by wire transfer, but any tax, assessment or governmental
charge imposed upon payments will be borne by the Holders of the Notes in
respect of which payments are made.
If the principal of (and premium, if any) or interest on any Note is
payable in other than United States dollars and such Specified Currency is not
available due to the imposition of exchange controls or other circumstances
beyond the control of the Company, the Company, at its expense, will be
entitled to satisfy its obligations to Holders of the Notes by making such
payment in United States dollars on the basis of the most recently available
Exchange Rate.
Notes may be issued from time to time as Indexed Notes or Amortizing
Notes. Indexed Notes are Notes for which the principal amount payable at the
stated maturity thereof or upon redemption or repayment, or the amount of
interest payable on an Interest Payment Date, or both, is determined by
reference to a currency exchange rate, composite currency or currencies,
commodity price or other financial or non-financial index as set forth in the
related pricing supplement. Amortizing Notes are Notes as to which all or a
portion of the principal amount is payable prior to the maturity date in
accordance with a schedule, by application of a formula or by reference to an
index as set forth in the related pricing supplement.
DEFINITIONS OF TERMS
Unless otherwise indicated in the related pricing supplement, the
following terms will have the following meanings for purposes of this
Prospectus Supplement:
<PAGE>
"Amortizing Note" means a Note all or a portion of the principal amount of
which, as set forth in the related pricing supplement and the Note, is payable
prior to the maturity date in accordance with a schedule, by application of a
formula or by reference to an index.
"Authorized Denomination" means, for any Note denominated in United States
dollars, $1,000 and integral multiples of $1,000 in excess thereof, and, for
Notes denominated in another Specified Currency, as set forth in the related
pricing supplement.
"Book-Entry Notes" means Notes which are represented by a single global
certificate which is deposited with the Depositary as described under "Book-
Entry Notes" herein.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the city in which the
principal corporate trust office of the Trustee is located are authorized or
obligated by law or executive order to be closed.
"Calculation Agent" means Chemical Bank, New York, New York.
"Calculation Date" means the date on which the Calculation Agent makes the
determination of the interest rate for a Floating Rate Note, which date will
be, for any Interest Determination Date, the tenth day after such Interest
Determination Date or, if such day is not a Market Day, the next Market Day.
"CD Rate" means, for any Interest Reset Date, the rate for the applicable
Interest Determination Date for negotiable certificates of deposit having the
specified Index Maturity as published in H.15(519) under the heading "CDs
(Secondary Market)". If such rate is not published prior to 9:00 A.M., New
York, New York time, on the applicable Calculation Date, then the CD Rate for
such Interest Reset Date will be the rate on such Interest Determination Date
for negotiable certificates of deposit having the specified Index Maturity as
published in Composite Quotations under the heading "Certificates of Deposit".
If by 3:00 P.M., New York, New York time, on such Calculation Date such rate is
not published in either H.15(519) or Composite Quotations, the CD Rate for such
Interest Reset Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates, as of 10:00 A.M., New
York, New York time, on such Interest Determination Date, of three leading New
York nonbank dealers of negotiable United States dollar certificates of deposit
selected by the Calculation Agent for negotiable certificates of deposit of
major United States money market banks with a remaining maturity closest to the
specified Index Maturity in a denomination of $5,000,000; provided, that if
fewer than three dealers so selected by the Calculation Agent are providing
such quotations, the then effective CD Rate will remain in effect for such
Interest Reset Date.
"CD Rate Note" means a Floating Rate Note which bears interest calculated
on the basis of the CD Rate.
"CMT Rate Note" means a Floating Rate Note which bears interest calculated
on the basis of the CMT Rate.
"CMT Rate" means, with respect to any Interest Determination Date relating
to a CMT Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the CMT Rate (a "CMT Rate Interest
S-5
<PAGE>
Determination Date"), the rate displayed on the Designated CMT Telerate Page
under the caption "... Treasury Constant Maturities ... Federal Reserve Board
Release H.15(519) Mondays Approximately 3:45 P.M.," under the column for the
Designated CMT Maturity Index for (i) if the Designated CMT Telerate Page is
7055, the rate on such CMT Rate Interest Determination Date and (ii) if the
Designated CMT Telerate Page is 7052, the week, or the month, as applicable,
ended immediately preceding the week in which the related CMT Rate Interest
Determination Date occurs. If such rate is no longer displayed on the relevant
page, or if not displayed by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such Treasury Constant Maturity rate for the Designated CMT
Maturity Index as published in H.15(519). If such rate is no longer published,
or if not published by 3:00 P.M., New York City time, on the related
Calculation Date, then the CMT Rate for such CMT Rate Interest Determination
Date will be such Treasury Constant Maturity rate for the Designated CMT
Maturity Index (or other United States Treasury rate for the Designated CMT
Maturity Index) for the CMT Rate Interest Determination Date with respect to
such Interest Reset Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 P.M. (New York City
time) on the CMT Rate Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York selected by the
Calculation Agent (from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one
of the highest) and the lowest quotation (or, in the event of equality, one of
the lowest)), for the most recently issued direct noncallable fixed rate
obligations of the United States ("Treasury Note") with an original maturity of
approximately the Designated CMT Maturity Index and a remaining term to
maturity of not less than such Designated CMT Maturity Index minus one year.
If the Calculation Agent cannot obtain three such Treasury Note quotations, the
CMT Rate for such CMT Rate Interest Determination Date will be calculated by
the Calculation Agent and will be a yield to maturity based on the arithmetic
mean of the secondary market offer side prices as of approximately 3:30 P.M.
(New York City time) on the CMT Rate Interest Determination Date of three
Reference Dealers in The City of New York (from five such Reference Dealers
selected by the Calculation Agent and eliminating the highest quotation (or, in
the event of equality, one of the highest) and the lowest quotation, (or, in
the event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least $100 million. If three or four
(and not five) of such Reference Dealers are quoting as described above, then
the CMT Rate will be based on the arithmetic mean of the offer prices obtained
and neither the highest nor lowest of such quotes will be eliminated; provided,
however, that if fewer than three Reference Dealers selected by the Calculation
Agent are quoting as described herein, the CMT Rate will be the CMT Rate in
effect on such CMT Rate Interest Determination Date. If two Treasury Notes
with an original maturity as described in the third preceding sentence have
remaining terms to maturity equally close to the Designated CMT Maturity Index,
the quotes for the CMT Rate Note with the shorter remaining term to maturity
will be used.
<PAGE>
"Commercial Paper Rate" means, for an Interest Reset Date, the Money
Market Yield (calculated as described below) of the per annum rate (quoted on a
bank discount basis) for the applicable Interest Determination Date for
commercial paper having the specified Index Maturity as published in H.15(519)
under the heading "Commercial Paper". If such rate is not published prior to
9:00 A.M., New York, New York time, on the applicable Calculation Date, then
the Commercial Paper Rate for such Interest Reset Date will be the Money Market
Yield of such rate on such Interest Determination Date for commercial paper
having the specified Index Maturity as published in Composite Quotations under
the heading "Commercial Paper". If by 3:00 P.M., New York, New York time, on
such Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, the Commercial Paper Rate for such Interest Reset Date
will be calculated by the Calculation Agent and will be the Money Market Yield
of the arithmetic mean of the offered per annum rates (quoted on a bank
discount basis), as of 11:00 A.M., New York, New York time, on such Interest
Determination Date, of three leading New York dealers of commercial paper
selected by the Calculation Agent for commercial paper of the specified Index
Maturity placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized rating agency; provided, that if fewer
than three dealers so selected by the Calculation Agent are providing such
quotations, the then effective Commercial Paper Rate will remain in effect for
such Interest Determination Date. For this purpose, "Money Market Yield" means
a yield (expressed as a percentage) calculated in accordance with the following
formula:
360 x D
Money Market Yield = 100 x -----------------
360 - (D x M)
S-6
where "D" is the per annum rate for commercial paper quoted on a bank discount
basis and expressed as a decimal; and "M" is the actual number of days in the
period from the Interest Reset Date to but excluding the day that numerically
corresponds to such Interest Reset Date (or, if there is no such numerically
corresponding day, the last day) in the calendar month that is the number of
months corresponding to the specified Index Maturity after the month in which
the Interest Reset Date falls.
"Commercial Paper Rate Note" means a Floating Rate Note which bears
interest calculated on the basis of the Commercial Paper Rate.
"Composite Quotations" means the applicable quotations published by the
Federal Reserve Bank of New York in its daily statistical release, "Composite
3:30 P.M. Quotations for U.S. Government Securities," or any successor
publication published by the Federal Reserve Bank of New York.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page designated in the applicable pricing supplement (or any
other page as may replace such page on that service for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519)) for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519).
If no such page is specified in the applicable pricing supplement, the
Designated CMT Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the United States Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30
years) specified in the applicable pricing supplement with respect to which the
<PAGE>
CMT Rate will be calculated. If no such maturity is specified in the
applicable pricing supplement, the Designated CMT Maturity Index shall be 2
years.
"ECU" means European Currency Unit.
"Exchange Rate" means, in respect of any obligation denominated in a
Specified Currency (other than United States dollars) which is to be paid in
respect of any Note in United States dollars, an amount of United States
dollars determined by the Exchange Rate Agent on the basis of the highest bid
quotation in the City of New York received by the Exchange Rate Agent as of
11:00 a.m., New York, New York time, on the Business Day as of which the
Exchange Rate is to be determined, from three recognized foreign exchange
dealers (one of which may be the Exchange Rate Agent) for the purchase by the
quoting dealer of the Specified Currency for United States dollars for
settlement on such payment date in the aggregate amount of the Specified
Currency in respect of which the Exchange Rate is being determined, and at
which rate the applicable dealer commits to execute an exchange contract.
"Exchange Rate Agent" means Chemical Bank.
"Federal Funds Rate" means, for any Interest Reset Date, the rate on the
applicable Interest Determination Date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)". If such rate is not
published prior to 9:00 A.M., New York, New York time, on the applicable
Calculation Date, then the Federal Funds Rate for such Interest Reset Date will
be the rate on such Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate". If by 3:00 P.M.,
New York, New York time, on such Calculation Date such rate is not published in
either H.15(519) or Composite Quotations, the Federal Funds Rate with respect
to such Interest Reset Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the rates, as of 9:00 A.M., New York, New York
time, on such Interest Determination Date, for the last transaction in
overnight Federal Funds arranged by three leading New York brokers of Federal
Funds transactions selected by the Calculation Agent; provided, that if fewer
than three brokers so selected by the Calculation Agent are providing such
quotations, the then effective Federal Funds Rate will remain in effect for
such Interest Reset Date.
"Federal Funds Rate Note" means a Floating Rate Note which bears interest
calculated on the basis of the Federal Funds Rate.
"Fixed Rate Note" means a Note which, as set forth in the related pricing
supplement and the Note, bears interest at a fixed rate of interest per annum.
"Floating Rate Note" means a Note which, as set forth in the related
pricing supplement and the Note, bears interest at a variable rate.
"H.15(519)" means Statistical Release H.15(519) as published by the Board
of Governors of the Federal Reserve System or any successor publication of such
Board of Governors.
"Index Maturity" means the period to maturity of the instrument or
obligation on which the related interest rate formula is based, as specified in
the related pricing supplement.
S-7
<PAGE>
"Indexed Note" means a Note which, as set forth in the related pricing
supplement and the Note, bears interest at a rate determined by reference to a
currency exchange rate, composite currency or currencies, commodity price or
other financial or non-financial index.
"Initial Redemption Date" means the date, if any, on and after which a
Note will be subject to redemption at the option of the Company, as specified
in the related pricing supplement.
"Interest Determination Date" means the date as of which the Calculation
Agent looks to the applicable Interest Rate Basis for purposes of resetting the
interest rate on Floating Rate Notes, which, with respect to any Interest Reset
Date: (a) for Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, CD
Rate Notes, CMT Rate Notes and Federal Funds Rate Notes, will be the second
Market Day preceding the Interest Reset Date; and (b) for Treasury Rate Notes,
will be the day of the week in which such Interest Reset Date falls on which
Treasury bills would normally be auctioned. Treasury bills are usually sold at
auction on the Monday of each week, unless that day is a legal holiday, in
which case the auction is usually held on the following Tuesday, except that
such auction may be held on the preceding Friday. If, as the result of a legal
holiday, an auction is so held on the preceding Friday, such Friday will be the
Interest Determination Date for the Interest Reset Date occurring in the next
week.
"Interest Payment Date" means the date on which interest is payable in
respect of a Note. Unless otherwise indicated in the related pricing
supplement, the Interest Payment Dates will be: for Fixed Rate Notes, March 1
and September 1; for Floating Rate Notes on which the interest rate is reset
weekly or monthly, the third Wednesday of each month or on the third Wednesday
of March, June, September and December of each year, as indicated in the
related pricing supplement; for Floating Rate Notes on which the interest rate
is reset quarterly, the third Wednesday of March, June, September and December;
for Floating Rate Notes on which the interest is reset semi-annually, the third
Wednesday of the two months specified in the related pricing supplement; for
Floating Rate Notes on which the interest rate is reset annually, the third
Wednesday of the month specified in the related pricing supplement; and, in
each case, at maturity. If an Interest Payment Date would otherwise fall on a
day that is not a Market Day, it will be the next succeeding Market Day (or, in
case of a LIBOR Note, if such date falls in the next calendar month, the
preceding Market Day).
"Interest Rate Basis" means the basis on which the interest on a Floating
Rate Note is to be calculated. The Interest Rate Basis may be the Commercial
Paper Rate, the Prime Rate, LIBOR, the Treasury Rate, the CD Rate, the CMT
Rate, the Federal Funds Rate or other rate specified in the related pricing
supplement, as adjusted by the Spread or the Spread Multiplier, or otherwise as
indicated in the pricing supplement.
"Interest Reset Date" means the date on which a change in the interest
rate on a Floating Rate Note will become effective, which changes may occur
weekly, monthly, quarterly, semiannually or annually. The Interest Reset
Dates will be: for Notes on which the interest rate is reset weekly (except
Treasury Rate Notes), Wednesday of each week; for Treasury Rate Notes on which
the interest rate is reset weekly, Tuesday of each week (except as otherwise
indicated below); for Notes on which the interest rate is reset monthly, the
third Wednesday of each month; for Notes on which the interest rate is reset
quarterly, the third Wednesday of March, June, September and December; for
Notes on which the interest rate is reset semi-annually, the third Wednesday of
<PAGE>
the two months specified in the related pricing supplement; and for Notes on
which the interest rate is reset annually, the third Wednesday of the month
specified in the related pricing supplement. If any Interest Reset Date would
otherwise be a day that is not a Market Day with respect to a Note, it will be
postponed to the next such Market Day, except that in the case of a LIBOR Note,
if the next Market Day is in the next calendar month, the Interest Reset Date
will be the immediately preceding such Market Day. For Treasury Rate Notes, if
the applicable auction date referred to in the definition of "Treasury Rate"
will occur on the date otherwise scheduled to be the Interest Reset Date for
such Note, then the Interest Reset Date will be the next following Business
Day.
"LIBOR" means, for any Interest Reset Date, an interest rate determined by
the Calculation Agent as follows:
(a) On the applicable Interest Determination Date, LIBOR will
be determined on the basis of the offered rates for deposits in the
Index Currency (as defined below) having the specified Index
Maturity, commencing on the second Market Day immediately following
such Interest Determination Date, which appear on the Designated
LIBOR Page specified in the applicable pricing supplement as of 11:00
A.M., London time, on such Interest Determination Date. "Index
Currency" means the currency (including composite currencies)
specified in the applicable pricing supplement as the currency for
which LIBOR shall be calculated. If no such currency is specified in
the applicable pricing supplement, the Index Currency shall be United
States dollars. "Designated LIBOR Page" means either (a) if "LIBOR
Reuters" is designated in the applicable pricing supplement, the
display on the Reuters Monitor Money Rates Service on the page
designated in the applicable pricing supplement (or such other page
as may replace such designated page on that service for the purpose
of displaying London interbank offered rates of major banks)
S-8
for the related Index Currency for the purpose of displaying the
London interbank rates of major banks for the applicable Index
Currency, or (b) if "LIBOR Telerate" is designated in the applicable
pricing supplement, the display on the Dow Jones Telerate Service on
the page designated in the applicable pricing supplement (or such
other page as may replace such designated page on that service or
such other service or services as may be nominated by the British
Bankers' Association for the purpose of displaying London interbank
offered rates for the related Index Currency) for the purpose of
displaying the London interbank rates of major banks for the
applicable Index Currency. If neither LIBOR Reuters nor LIBOR
Telerate is specified in the applicable pricing supplement, LIBOR for
the applicable Index Currency will be determined as if LIBOR Telerate
(and, if the United States dollar is the Index Currency, page 3750)
has been specified. If "LIBOR Reuters" is specified in the
applicable pricing supplement and at least two such offered rates
appear on the Designated LIBOR Page, LIBOR for such Interest Reset
Date will be the arithmetic mean of such offered rates as determined
by the Calculation Agent (unless the Designated LIBOR Page by its
terms provides for only a single rate, in which case such single rate
shall be used). If fewer than two offered rates appear, or no rate
appears, as applicable, LIBOR will be determined as described in (b)
below.
<PAGE>
(b) With respect to a LIBOR Interest Determination Date on
which fewer than two offered rates appear, or no rate appears, as the
case may be, for the applicable Index Maturity on the Designated
LIBOR Page as described in (a) above, LIBOR will be determined on the
basis of the rates at approximately 11:00 A.M., London time, on such
Interest Determination Date at which deposits in the Index Currency
having the specified Index Maturity are offered to prime banks in the
London interbank market by four major banks in the London interbank
market selected by the Calculation Agent commencing on the second
Market Day immediately following such LIBOR Interest Determination
Date and in a principal amount equal to an amount that in the
Calculation Agent's judgment is representative for a single
transaction in such Index Currency in such market at such time (a
"Representative Amount"). The Calculation Agent will request the
principal London office of each of such banks to provide a quotation
of its rate. If at least two such quotations are provided, LIBOR for
such Interest Reset Date will be the arithmetic mean of such
quotations. If fewer than two quotations are provided, LIBOR for
such Interest Reset Date will be the arithmetic mean of the rates
quoted at approximately 11:00 A.M. (or such other time as may be
specified in the applicable pricing supplement), in the applicable
Principal Financial Center (as defined below), on such Interest
Determination Date by three major banks in such Principal Financial
Center, selected by the Calculation Agent, for loans in the Index
Currency to leading European banks having the specified Index
Maturity commencing on the second Market Day immediately following
such LIBOR Interest Determination Date and in a Representative
Amount; provided, that if fewer than three banks so selected by the
Calculation Agent are providing such quotations, the then effective
LIBOR rate will remain in effect for such Interest Reset Date.
"Principal Financial Center" will generally be the principal
financial center of the country of the specified Index Currency,
except that with respect to ECUs, the Principal Financial Center
shall be Luxembourg.
"LIBOR Note" means a Floating Rate Note which bears interest calculated on
the basis of LIBOR.
"Market Day" means any Business Day in New York, New York or, for a LIBOR
Note, any such Business Day on which dealings in deposits in the Index Currency
are transacted in the London interbank market.
"Optional Repayment Date" means a date, if any, on which a Note will be
subject to repayment at the option of the Holder, as indicated in the related
pricing supplement.
"Prime Rate" means, with respect to any Interest Reset Date, the rate set
forth for the relevant Interest Determination Date in H.15(519) under the
heading "Bank Prime Loan". If such rate is not published prior to 9:00 A.M.
New York, New York time, on the applicable Calculation Date, then the Prime
Rate for such Interest Reset Date will be the arithmetic mean of the rates of
interest publicly announced by each bank that appears on the display designated
as page "NYMF" on the Reuter Monitor Money Rates Service (or such other page as
may replace the NYMF page on that service for the purpose of displaying prime
rates or base lending rates of major United States banks) ("Reuters Screen NYMF
Page") as such bank's prime rate or base lending rate as in effect for such
Interest Determination Date as quoted on the Reuters Screen NYMF Page on such
date. If fewer than four such rates appear on the Reuters Screen NYMF Page on
<PAGE>
such date, the Prime Rate for such Interest Reset Date will be the arithmetic
mean of the prime rates or base lending rates (quoted on the basis of the
actual number of days in a 360-day year) as of the close of business on such
Interest Determination Date by three major New York banks selected by the
Calculation Agent; provided, that if fewer than three banks so selected by the
Calculation Agent are providing such quotations, the then effective Prime Rate
will remain in effect for such Interest Reset Date.
"Prime Rate Note" means a Floating Rate Note which bears interest on the
basis of the Prime Rate.
S-9
"Regular Record Date" means, unless otherwise indicated in the related
pricing supplement: for Fixed Rate Notes, February 15 and August 15; and, for
Floating Rate Notes, the date 15 calendar days prior to each Interest Payment
Date.
"Specified Currency" means the currency or composite currency in which a
Note is denominated, and in which principal (and premium, if any) and/or
interest on a Note will be payable.
"Spread" means the number of basis points applicable to the Interest Rate
Basis for purposes of calculating interest on a Floating Rate Note, as
specified in the related pricing supplement.
"Spread Multiplier" means the percentage applicable to the Interest Rate
Basis for purposes of calculating the interest on a Floating Rate Note, as
specified in the related pricing supplement.
"Treasury Rate" means, for any Interest Reset Date, the rate for the
auction on the applicable Interest Determination Date of direct obligations of
the United States ("Treasury Bills") having the specified Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities/Treasury
Bills/Auction Average (Investment)" or, if not so published by 9:00 A.M., New
York, New York time, on the applicable Calculation Date, the auction average
rate (expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) for such auction as
otherwise announced by the United States Department of the Treasury. If the
results of such auction of Treasury Bills having the specified Index Maturity
are not published or reported as provided above by 3:00 P.M., New York, New
York time, on such Calculation Date, or if no such auction is held during such
week, then the Treasury Rate will be the rate set forth in H.15(519) for the
applicable Interest Determination Date for the specified Index Maturity under
the heading "U.S. Government Securities/Treasury Bills/Secondary Market". If
such rate is not so published by 3:00 P.M., New York, New York time, on the
applicable Calculation Date the Treasury Rate with respect to such Interest
Reset Date will be calculated by the Calculation Agent and will be a yield to
maturity (expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) of the arithmetic mean of
the secondary market bid rates as of approximately 3:30 P.M., New York, New
York time, on such Interest Determination Date, of three primary United States
government securities dealers in the City of New York selected by the
Calculation Agent for the issue of Treasury Bills with a remaining maturity
closest to the specified Index Maturity; provided, that if fewer than three
dealers so selected by the Calculation Agent are providing such quotations, the
then effective Treasury Rate will remain in effect for such Interest Reset
Date.
<PAGE>
"Treasury Rate Note" means a Floating Rate Note which bears interest
calculated on the basis of the Treasury Rate.
BOOK-ENTRY NOTES
At the option of the Company, if specified in the related pricing
supplement, the Notes may be issued as Book-Entry Notes. Upon issuance, all
Book-Entry Notes bearing interest at the same rate or pursuant to the same
formula, having the same date of issuance, redemption provisions, if any,
Specified Currency, stated maturity and other terms will be represented by a
single global Note. Each global Note representing Book-Entry Notes will be
deposited with, or on behalf of, The Depository Trust Company, as depositary
(the "Depositary"), and will be registered in the name of the Depositary or a
nominee of the Depositary. At the date of this Prospectus Supplement, the
Depositary accepts deposits of global Notes denominated in United States
dollars only.
Ownership of beneficial interests in a global Note will be limited to
participants and to persons that may hold interests through institutions that
have accounts with the Depositary ("participants"). Ownership of beneficial
interests by participants in a global Note will be shown on, and the transfer
of that ownership interest will be effected only through, records maintained by
the Depositary for such global Note. Ownership of beneficial interests in such
global Note by persons that hold through participants will be shown on, and the
transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant.
Payment of principal of and any premium and interest on Book-Entry Notes
represented by any such global Note will be made to the Depositary or its
nominee, as the case may be, as the sole registered owner and the sole Holder
of the Book-Entry Notes represented thereby for all purposes under the
Indenture. The Company, the Trustee and their agents will not have any
responsibility or liability for any aspect of the Depositary's records relating
to or payments made on account of beneficial ownership interests in a global
Note representing any Book-Entry Notes or for maintaining, supervising or
reviewing any of the Depositary's records relating to such beneficial ownership
interests.
The Company has been advised by the Depositary that upon receipt of any
payment of principal of or any premium or interest on any such global Note, the
Depositary will immediately credit, on its book-entry registration and transfer
system, the accounts of participants with payments in amounts proportionate to
their respective beneficial
S-10
interests in the principal amount of such global Note as shown on the records
of the Depositary. The accounts to be credited will be designated by the
soliciting Agent or, to the extent that such Notes are offered and sold
directly by the Company, by the Company. Payments by participants to owners of
beneficial interests in a global Note held through such participants will be
governed by standing instructions and customary practices, as is now the case
with securities held for customer accounts registered in "street name", and
will be the sole responsibility of such participants.
No global Note described above may be transferred except as a whole by a
nominee of the Depositary to the Depositary or another nominee of the
<PAGE>
Depositary or by the Depositary or any such nominee to a successor of the
Depositary or a nominee of such successor.
A global Note representing Book-Entry Notes is exchangeable for definitive
Notes in registered form, bearing interest (if any) at the same rate or
pursuant to the same formula, having the same date of issuance, redemption
provisions, if any, Specified Currency, stated maturity and other terms and of
differing denominations aggregating a like amount, only if (x) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for such global Note or if at any time the Depositary ceases to be a clearing
agency registered under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and the Company does not appoint a successor Depository within
90 days or (y) the Company approves such exchange. Any global Note that is
exchangeable pursuant to the preceding sentence will be exchangeable for
definitive Notes in registered form, bearing interest (if any) at the same rate
or pursuant to the same formula, having the same date of issuance, redemption
provisions, if any, Specified Currency, stated maturity and other terms and of
differing denominations aggregating a like principal amount. Such definitive
Notes will be registered in the names of the owners of the beneficial interests
in such global Notes as provided by the Depositary's participants.
Except as provided above, owners of beneficial interests in such a global
Note will not be entitled to receive physical delivery of Notes in definitive
form and will not be considered the Holders thereof for any purpose under the
Indenture, and no global Note representing Book-Entry Notes will be
exchangeable. Accordingly, each person owning a beneficial interest in such a
global Note must rely on the procedures of the Depositary and, if such person
is not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a Holder under the
Indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and such laws may impair the ability to transfer beneficial interests in
a global Note.
The Depositary may grant proxies and otherwise authorize participants to
give or take any request, demand, authorization, direction, notice, consent,
waiver or other action which a Holder is entitled to give or take under the
Indenture. The Company understands that under existing industry practices, in
the event that the Company requests any action of Holders or that an owner of a
beneficial interest in such a global Note desires to give or take any action
which a Holder is entitled to give or take under the Indenture, the Depositary
would authorize the participants holding the relevant beneficial interests to
give or take such action, and such participants would authorize beneficial
owners owning through such participants to give or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
The Depositary has advised the Company that the Depositary is a limited-
purpose trust company organized under the laws of the State of New York, 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 under the Exchange Act. The Depositary was created to hold the
securities of its participants and to facilitate the clearance and settlement
of securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers (including the
Agents), banks, trust companies, clearing corporations, and certain other
organizations some of whom (and/or their representatives) own the Depositary.
<PAGE>
Access to the Depositary's book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodian relationship with a participant, either directly or indirectly.
S-11
FOREIGN CURRENCY RISKS
GENERAL
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL THE RISKS OF AN
INVESTMENT IN THE NOTES DENOMINATED IN OTHER THAN UNITED STATES DOLLARS.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS
TO THE RISKS ENTAILED BY AN INVESTMENT IN THE NOTES DENOMINATED IN OTHER THAN
UNITED STATES DOLLARS. NOTES DENOMINATED IN OTHER THAN UNITED STATES DOLLARS
ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED WITH
RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
Exchange Rates and Exchange Controls. An investment in Notes that are
denominated in other than United States dollars entails significant risks that
are not associated with a similar investment in a security denominated in
United States dollars. Such risks include the possibility of significant
changes in rates of exchange between the United States dollar and the various
foreign currencies or composite currencies and the possibility of the
imposition or modification of foreign exchange controls by either the United
States or foreign governments. Such risks depend on economic and political
events over which the Company has no control. In recent years, rates of
exchange between the United States dollar and certain foreign currencies have
been highly volatile and such volatility may be expected in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative of fluctuations that may occur during the term of
any Note. Depreciation of the Specified Currency against the United States
dollar would result in a decrease in the effective yield of such Note below its
coupon rate, and in certain circumstances could result in a loss to the
investor on a United States dollar basis.
Governments have imposed from time to time and may in the future impose
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at a Note's maturity. Even if there are no
actual exchange controls, it is possible that the Specified Currency for any
particular Note would not be available at such Note's maturity. In that event,
the Company will repay in United States dollars on the basis of the most
recently available Exchange Rate. See "Description of Notes Payment of
Principal and Interest".
Currently, there are limited facilities in the United States for
conversion of United States dollars into foreign currencies, and vice versa.
In addition, banks do not offer non-United States dollar denominated checking
or savings account facilities in the United States. Accordingly, payments on
Notes made in a Specified Currency other than United States dollars will be
made from an account with a bank located in the country issuing the Specified
Currency (or, with respect to Notes denominated in ECUs, Brussels). See
"Description of Notes Payment of Principal and Interest".
The information set forth in the Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company does
not undertake any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any matters
<PAGE>
that may affect the purchase, holding or receipt of payments of principal of
and interest on the Notes. Such persons should consult their own financial and
legal advisors with regard to such matters.
Governing Law and Judgments. The Notes will be governed by and construed
in accordance with the laws of the State of New York. If an action based on
the Notes were commenced in a court in the United States, it is likely that
such court would grant judgment relating to the Notes only in United States
dollars. It is not clear, however, whether, in granting such judgment, the
rate of conversion into United States dollars would be determined with
reference to the date of default, the date judgment is rendered or some other
date.
EXCHANGE RATE AND CONTROLS FOR SPECIFIED CURRENCIES
With respect to any Note denominated in other than United States dollars,
a Currency Supplement with respect to the applicable Specified Currency (which
supplement will include information with respect to applicable current foreign
exchange controls, if any) is attached to this Prospectus Supplement. The
information therein concerning exchange rates is furnished as a matter of
information only and should not be regarded as indicative of the range of or
trends in fluctuations in currency exchange rates that may occur in the future.
UNITED STATES TAXATION
The following summary of the principal United States federal income tax
consequences of the purchase, ownership and disposition of a Note is based on
the advice of Armstrong, Teasdale, Schlafly & Davis, counsel for the Company.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), final, temporary and proposed Treasury Regulations, Revenue Rulings
and judicial decisions in existence on the date of this Prospectus Supplement.
It deals only with Notes held as capital assets and does not deal with special
classes of holders, such as dealers in securities or currencies, life insurance
companies, persons holding Notes as a hedge
S-12
against currency risk, persons who enter into certain hedging transactions in
connection with Notes, persons holding Notes as part of a straddle (as defined
in Section 1092 of the Code) or as part of a conversion transaction (as defined
in Section 1258 of the Code), United States holders whose functional currency
(as defined in Section 985 of the Code) is other than the United States dollar
or holders other than United States persons. The tax consequences of holding a
particular Note will depend, in part, on the particular terms of such Note as
set forth in the related pricing supplement. Potential purchasers of Notes
should also understand that future legislative, administrative and judicial
changes could modify the tax consequences described in this summary. As used
in this section, "holder" refers to the person who is considered the owner of a
Note for federal income tax purposes, whether or not such person is the
registered holder of a Note.
UNITED STATES PERSONS
"United States person" means an individual who is a citizen or resident of
the United States for United States federal income tax purposes, an estate or
trust subject to United States federal income taxation without regard to the
source of its income, or a corporation, partnership or other entity created or
<PAGE>
organized in or under the laws of the United States, or any State or the
District of Columbia.
PAYMENTS OF INTEREST ON NOTES
Except as set forth below, interest on a Note (whether or not denominated
in United States dollars) will be taxable to a holder as ordinary interest
income at the time it is accrued or received, in accordance with the holder's
method of accounting for tax purposes. If interest on a Note is payable in a
currency other than the United States dollar ("Foreign Currency"), the amount
of income will be the United States dollar value of the Foreign Currency
received, based on the exchange rate in effect on the date of receipt, or in
the case of an accrual basis holder, the United States dollar value of the
Foreign Currency accrued, based on the average exchange rate in effect during
the interest accrual period (or with respect to an interest accrual period that
spans two taxable years, at the average rate for the portion of the period
within the taxable year). Upon receipt by an accrual basis holder of an
interest payment paid in Foreign Currency, the holder will recognize foreign
currency gain or loss measured by the difference between the interest received
translated into United States dollars at the exchange rate in effect on the
date of receipt and the interest previously accrued, and such gain or loss will
be treated as ordinary income or loss. An accrual basis holder may elect to
accrue interest income (including original issue discount) payable in a Foreign
Currency at the exchange rate in effect on the last day of the interest accrual
period (and in the case of the first portion of an interest accrual period that
spans two taxable years, at the exchange rate in effect on the last day of the
first taxable year for the portion of the interest accrual period within such
taxable year). If such election is made and the last day of the interest
accrual period (or in the case of the first portion of an interest accrual
period that spans two taxable years, the last day of the first taxable year) is
within five business days of the date of receipt, the accrual basis holder may
translate interest income at the exchange rate in effect on the date of
receipt. Such election must be consistently applied to all debt instruments
owned by such holder from year to year and cannot be changed without the
consent of the Internal Revenue Service.
ORIGINAL ISSUE DISCOUNT NOTES
The following is a general discussion of the United States federal income
tax consequences to holders of Notes issued with original issue discount ("OID
Notes").
Original issue discount is the excess of the stated redemption price at
maturity of a Note over its issue price if such excess is more than a de
minimis amount (generally 1/4 of 1% of the Note's stated redemption price at
maturity multiplied by the number of complete years to maturity). The issue
price of an issue of Notes will be equal to the first price at which a
substantial amount of such Notes are sold to the public. The stated redemption
price at maturity of a Note is the total of all payments required to be made
under the Note other than "qualified stated interest" payments. The term
"qualified stated interest" means stated interest that is unconditionally
payable at least annually either at a single fixed rate or at a floating rate
established by a Variable Rate Note. Interest is payable at a single fixed
rate only if the rate takes into account the length of the intervals between
payments. A Variable Rate Note means a Note which (a) has an issue price that
does not exceed the sum of the noncontingent principal payments to be made on
the Note by more than a specified amount, (b) provides for stated interest
(compounded or paid at least annually) at a single qualified floating rate or a
<PAGE>
single objective rate, and (c) provides that each qualified floating or
objective rate in effect during an accrual period is set at the current value
of that rate (which is the rate on any day during the period beginning three
months prior to the first day on which the value is in effect under the Note
and ending one year following that day). A "qualified floating rate" is any
floating rate where variations in such rate can reasonably be expected to
measure contemporaneous variations in the cost of newly borrowed funds in the
same currency as the Note (e.g., the Prime Rate or LIBOR). A fixed multiple of
not more than 1.35 times a qualified floating rate, whether or not this rate is
increased or decreased by a fixed rate, is a qualified floating rate.
Restrictions on the maximum or minimum stated interest rate ("cap" or "floor"),
restrictions
S-13
on the amount of increase or decrease in the stated interest rate ("governor")
or other similar restrictions generally will cause the rate not to be treated
as a qualified floating rate. However, the following restrictions will not
cause a variable rate to fail to be a qualified floating rate - (i) a cap,
floor or governor that is fixed throughout the term of the Note, (ii) a cap or
similar restriction that is not reasonably expected as of the issue date to
cause the yield on the Note to be significantly less than the expected yield
determined without the cap, (iii) a floor or similar restriction that is not
reasonably expected as of the date of issue to cause the yield on the Note to
be significantly more than the expected yield determined without the floor, or
(iv) a governor or similar restriction that is not reasonably expected as of
the issue date to cause the yield on the Note to be significantly more or
significantly less than the expected yield determined without the governor. An
"objective rate" includes a rate other than a qualified floating rate based on
the change in price of actively traded personal property or on changes in the
value of an index of the prices of such property. An objective rate must be
determined using a single formula that is fixed throughout the term of the
Note. A multiple of a qualified floating rate is also an objective rate.
Under these rules, Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes,
Treasury Rate Notes, CD Rate Notes, CMT Rate Notes and Federal Funds Rate
Notes, other than certain Notes subject to caps or floors, should generally be
treated as Variable Rate Notes. Special rules apply to Notes which are not
Variable Rate Notes as defined above, e.g. (i) bear interest at a floating rate
subject to a maximum numerical interest rate limitation or a minimum numerical
interest rate limitation, (ii) bear interest for one or more accrual periods at
a rate below the rate applicable for the remaining term of such Note (e.g.,
Notes with interest holidays), (iii) bear interest at one or more variable
rates that are not qualified floating rates or objective rates or (iv) bear
interest at the lesser of two or more variable rates. Such Notes may be
treated as issued with original issue discount; their stated interest may be
treated as original issue discount; or such Notes may be treated as contingent
payment obligations. The applicable pricing supplement will contain a
discussion of any special provisions of the income tax regulations which may be
relevant to such Notes.
Long-Term OID Notes. A holder of OID Notes having maturities in excess of
one year ("Long-Term OID Notes") is required to include original issue discount
in income as it accrues, in accordance with a constant yield method, before the
receipt of cash attributable to such income. The amount of original issue
discount includible in income by the holder of a Long-Term OID Note during the
taxable year is the sum of the daily portions of original issue discount with
respect to such Note for each day during the taxable year on which such holder
held such Note ("accrued original issue discount"). The daily portion of
<PAGE>
original issue discount on any Long-Term OID Note is determined by allocating
to each day in any "accrual period" a ratable portion of the original issue
discount allocable to that period. As discussed below, the daily portion is
reduced in the case of a holder who pays an acquisition premium for a Long-Term
OID Note. The amount of original issue discount on a Long-Term OID Note
allocable to each accrual period is determined by (i) multiplying the "adjusted
issue price" of the Long-Term OID Note at the beginning of such accrual period
by its "yield to maturity" (adjusted for the length of the accrual period) and
(ii) subtracting from that product the amount of qualified stated interest, if
any, allocable to such accrual period. If the interval between payments of
qualified stated interest contains more than one accrual period, the amount of
qualified stated interest payable at the end of the interval is allocated pro
rata (on the basis of their relative lengths) to each accrual period in the
interval. The term "accrual period" means, in the case of a Long-Term OID
Note, a period of any length up to one year which the holder elects to use to
compute original issue discount, provided that each scheduled payment of
principal or interest occurs either on the final day of an accrual period or on
the first day of an accrual period. The holder may vary the length of the
accrual period over the term of the Long-Term Note so long as the holder also
adjusts the Long-Term Note's yield to maturity to reflect the length of the
period. The term "yield to maturity" means the discount rate which, when used
to compute the present value of all principal and interest payments to be made
under the Note, will produce an amount equal to the issue price of the Note.
The "adjusted issue price" of a Long-Term OID Note at the beginning of any
accrual period is the sum of the issue price of the Long-Term OID Note plus the
accrued original issue discount for each prior accrual period (without regard
to any reduction for amortized acquisition premium) plus any qualified stated
interest applicable to the prior accrual periods not yet payable less any prior
payments on the Long-Term OID Note that were not qualified stated interest
payments. In computing the amount of original issue discount allocable to each
accrual period for a Variable Rate Note which is a Long-Term OID Note, the
Variable Rate Note is "converted" to an equivalent fixed rate debt instrument
by substituting an appropriate fixed rate (as specified by the income tax
regulations) for the variable rate. The rules applicable to fixed rate
instruments, described above, are then applied to determine OID accruals.
Variable Rate Notes may be subject to certain special rules and any special tax
considerations with respect to Variable Rate Notes will be set forth in the
related pricing supplement. With respect to an initial accrual period which is
shorter than other accrual periods, the original issue discount allocable to
such period may be computed using any reasonable method. With respect to the
final accrual period, the original issue discount allocable to such period is
the difference between the amount payable at maturity other than qualified
stated interest and the adjusted issue price at the beginning of the final
accrual period.
S-14
Under the foregoing rules, holders may have to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
Short-Term OID Notes. In the case of Notes having maturities of one year
or less ("Short-Term OID Notes"), a special rule provides that payments of
stated interest will not be considered to be qualified stated interest. A cash
basis holder of a Short-Term OID Note will not be required to accrue original
issue discount on a current basis, but may elect to do so. Such an election
will apply to all obligations acquired by the holder on or after the first day
of the first taxable year for which the election is made and will be
<PAGE>
irrevocable without the consent of the Internal Revenue Service. A cash basis
holder of a Short-Term OID Note will, nevertheless, be required to take stated
interest into income as it is received. Accrual basis holders and certain
other holders, including banks and dealers in securities, are required to
accrue the original issue discount on Short-Term OID Notes currently. Such
holders will accrue original issue discount on a straight-line basis, but may
make an irrevocable election to accrue it under the constant yield method. In
the case of a holder who is not required and who does not elect to include the
original issue discount in income currently, (a) any gain realized on the
disposition of a Short-Term OID Note will be ordinary income to the extent of
the original issue discount accrued on a straight-line basis (or, if elected,
according to a constant yield method based on daily compounding) through the
date of disposition reduced by any payments of stated interest or other
original issue discount received and (b) such holder will be required to defer
net deductions for interest on borrowing allocable to these Short-Term OID
Notes in an amount not exceeding the deferred income until the deferred income
is realized.
Any holder (whether cash or accrual basis) who otherwise is required or
has elected to accrue original issue discount on a Short-Term OID Note can
elect to accrue the "acquisition discount," if any, with respect to the
Short-Term OID Note on a current basis in lieu of original issue discount.
Acquisition discount is the excess of the sum of all remaining payments to be
made under the Short-Term Note, including stated interest, over the holder's
tax basis in the Note at the time of acquisition. Acquisition discount will be
treated as accruing on a straight-line basis, unless the holder makes an
irrevocable election to use the constant yield method.
Currency Gain or Loss on Receipt of OID. Original issue discount for any
period that is denominated in a Foreign Currency will be determined in the
Foreign Currency and then translated into United States dollars based on the
average exchange rate in effect during the accrual period or based on the
exchange rate in effect on the last day of the accrual period if the holder has
elected as described above to use such exchange rate for interest income
(including original issue discount) on all debt instruments. Except as
provided below with respect to the disposition of a Note, upon receipt of an
amount attributable to original issue discount, a holder will recognize
ordinary income or loss measured by the difference between the original issue
discount received translated into United States dollars at the exchange rate in
effect on the date of receipt and the amount of original issue discount
accrued.
Dual Currency Notes. Under proposed regulations issued March 17, 1992
(the "Proposed Foreign Currency Regulations"), which are proposed to become
effective for Notes issued on or after the date such regulations are published
in final form in the Federal Register, dual currency notes held by a holder
which provide for qualified stated interest payments to be paid in, or
determined by reference to, one currency and for the stated redemption price at
maturity to be paid in, or determined by reference to, another currency will be
treated as two separate hypothetical debt instruments. One debt instrument
will be a zero coupon bond denominated in the currency of the stated redemption
price at maturity. The second hypothetical debt instrument will be an
amortizing installment bond denominated in the currency of the qualified stated
interest payments. It does not appear that a holder may rely on the Proposed
Foreign Currency Regulations in the case of dual currency Notes issued before
such regulations become effective.
<PAGE>
Other Features and Reporting of OID. Certain of the OID Notes may be
redeemed prior to maturity either at the option of the holder or the Company.
OID Notes containing such feature may be subject to rules that differ from the
general rules discussed above. Persons intending to purchase OID Notes with
any such feature should carefully examine the related pricing supplement and
should consult with their own tax advisors with respect to such features since
the tax consequences with respect to original issue discount will depend, in
part, on the particular terms and the particular features of the purchased
Note.
The Company is required to report to the Internal Revenue Service the
amount of original issue discount accrued on OID Notes held of record by United
States persons other than corporations and other exempt holders. The amount
required to be reported by the Company may not be equal to the amount of
original issue discount required to be reported as taxable income by a holder
of such OID Notes where the holder and the Company use different accrual
periods to determine the amount of original issue discount or where the holder
is not an original purchaser.
S-15
TAX BASIS AND DISPOSITION OF NOTES
A holder's tax basis in a Note, other than an OID Note, will generally be
the United States dollar cost of the Note to such holder (which in the case of
a Note purchased with Foreign Currency will be the United States dollar value
of the purchase price on the date of purchase) increased by any amounts of
market discount previously included in income by the holder with respect to
such Note and reduced by any amortized bond premium and by principal payments
received by the holder. A holder's tax basis in an OID Note will generally be
the cost of the Note to such holder increased by any original issue discount
and market discount previously included in income and decreased by the amount
of any payment on the OID Note, other than a payment of qualified stated
interest, and by any amortized acquisition premium.
Except as discussed above with respect to Short-Term OID Notes, upon the
disposition of a Note, a holder will recognize gain or loss equal to the
difference between the amount realized on the disposition (or the United States
dollar value of the amount, if it is realized in a Foreign Currency) and the
holder's tax basis in the Note. Gain or loss recognized by a holder on the
disposition of a Foreign Currency Note which is attributable to changes in
exchange rates will be treated as ordinary income or loss, but such income or
loss will be taken into account only to the extent of the total gain or loss on
the disposition. Except as provided below with respect to market discount, any
remaining gain or loss so recognized will be capital gain or loss and will be
long-term capital gain or loss if, at the time of the disposition, the Note was
held for more than one year.
EXCHANGE OF FOREIGN CURRENCY
The tax basis of a Foreign Currency will be the United States dollar cost
of the Foreign Currency on the date such Foreign Currency is purchased.
Foreign Currency received as interest on a Foreign Currency Note will have a
tax basis equal to its United States dollar value at the time such interest is
received. The amount of gain or loss recognized on a sale or exchange of the
Foreign Currency will be equal to the difference between (i) the amount of
United States dollars, or the fair market value in United States dollars of the
other currency or property, received in the sale or exchange and (ii) the tax
<PAGE>
basis of the Foreign Currency. Generally, any such gain or loss will be
ordinary income or loss.
A purchaser of a Foreign Currency Note for Foreign Currency would
recognize gain or loss on the disposition of Foreign Currency in an amount
equal to the difference, if any, between such holder's tax basis in the Foreign
Currency and its United States dollar fair market value on the date it is used
to purchase a Foreign Currency Note. Generally, any such gain or loss will be
ordinary income or loss.
NOTES DENOMINATED IN HYPERINFLATIONARY CURRENCIES
Under the Proposed Foreign Currency Regulations, which, as indicated
above, are proposed to become effective for Notes issued on or after the date
such regulations are published in final form in the Federal Register, if a
holder acquires a Note denominated in a Foreign Currency which is a
hyperinflationary currency, the holder will realize exchange gain or loss for
each taxable year determined by reference to the change in exchange rates
between (i) the later of the first day of the taxable year or the date the Note
was acquired and (ii) the earlier of the last day of the taxable year or the
date the Note is disposed of. Generally, any such gain or loss will increase
or decrease interest income (and to the extent it exceeds interest income will
be treated as ordinary loss) and will be an adjustment to the functional
currency basis of the holder for purposes of subsequent computations of
exchange gain or loss.
PREMIUM AND MARKET DISCOUNT
If a holder purchases a Note with a maturity date more than one year from
the date of issue for an amount that is less than its stated redemption price
at maturity, or less than its revised issue price if the Note is an OID Note,
the amount of the difference will be treated as "market discount" for federal
income tax purposes, unless such difference is less than a specified de minimis
amount (generally 1/4 of 1% of the Note's stated redemption price at maturity,
or its revised issue price, if the Note is an OID Note, multiplied by the
number of complete years to maturity from the date of acquisition by the
holder). The revised issue price of an OID Note is the sum of the issue price
of the Note and the aggregate amount of the original issue discount includible,
without regard to the rules for acquisition premium discussed below, in the
gross income of all previous holders of the Note. While not entirely clear,
any payments to prior holders of amounts other than qualified stated interest
should be subtracted in determining the revised issue price. Under the market
discount rules, a holder will be required to treat any principal payment on, or
any gain on the disposition of, a Note as ordinary income to the extent of the
market discount which has not previously been included in income and which is
treated as having accrued on such Note at the time of such payment or
disposition. If such Note is disposed of in certain nontaxable transactions
(including a gift), accrued market discount will be includible as ordinary
income to the holder as if such holder had sold the Note at its then fair
market value. In addition, the holder may be required to defer until the
maturity of the Note, or its earlier
S-16
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness incurred or continued to purchase or carry
such Note.
<PAGE>
Any market discount will be considered to accrue on a straight-line basis
during the period from the date of acquisition to the maturity date of the
Note, unless the holder makes an irrevocable election to compute the accrual on
a constant yield basis. A holder of a Note may elect to include market
discount in income currently as it accrues (on either a straight-line or a
constant yield basis), in which case the rule described above regarding
deferral of interest deductions will not apply. This election to include
market discount in income currently, once made, applies to all market discount
obligations of a holder acquired on or after the first day of the first taxable
year to which the election applies, and may not be revoked without the consent
of the Internal Revenue Service.
In the case of a Foreign Currency Note, market discount will be determined
in the Foreign Currency. The amount of accrued market discount (other than
market discount currently included in income pursuant to an election by the
holder) which is required to be recognized on the disposition of the Note will
be translated into United States dollars based on the exchange rate on the
disposition date. No part of such accrued market discount will be treated as
exchange gain or loss. Accrued market discount which a holder elects to accrue
into income currently is translated into United States dollars using the
average exchange rate during the accrual period. In such case, movement in the
exchange rate between the accrual date and disposition date will result in
exchange gain or loss at the time of the disposition with respect to the amount
of the market discount accrued.
A person who purchases an OID Note for an amount that is greater than its
adjusted issue price will be considered to have purchased such Note at an
"acquisition premium", unless the holder will be considered to have purchased
the Note at a premium as described below. Under the acquisition premium rules,
the daily portion of original issue discount which such holder must include in
its gross income with respect to such Note for any accrual period will be
reduced by the daily portion of such acquisition premium properly allocable to
such period.
If a person acquires a Note for an amount that is greater than the sum of
all amounts payable under the Note after the purchase date other than payments
of qualified stated interest, such holder will be considered to have purchased
such Note at a premium ("bond premium") and the Note will not be an OID Note in
the case of such holder. Such holder may make an irrevocable election to
amortize such premium generally over the remaining term of the Note. The
election applies to all bonds held by the holder at the beginning of the first
taxable year to which the election applies. Premium will be amortized using a
constant yield method. The amount amortized in any year will be treated as a
reduction of the holder's interest income from the Note. Bond premium on a
Note held by a holder that does not make such an election will decrease the
gain or increase the loss otherwise recognized on disposition of the Note.
In the case of a Foreign Currency Note, bond premium which a holder elects
to amortize or acquisition premium will be computed in the relevant Foreign
Currency and will reduce interest income or original issue discount determined
in such Foreign Currency. At the time amortizable bond premium offsets
interest income, a holder may realize exchange gain or loss (taxable as
ordinary income or loss, but generally not as interest income or expense),
measured by the difference between exchange rates at that time and at the time
of the acquisition of the Note. If a holder does not elect to amortize bond
premium, the amount of the bond premium will constitute a market loss when the
bond matures.
<PAGE>
ELECTION BY HOLDER
A holder of a Note may elect to include in gross income all interest that
accrues on a Note using the constant yield method. For purposes of the
election, interest includes stated interest, acquisition discount, original
issue discount, de minimis original issue discount, market discount, de minimis
market discount and unstated interest, as adjusted by any amortizable bond
premium or acquisition premium. If the holder makes the election with respect
to any obligation with amortizable bond premium or market discount, the
election will be deemed made for all of the holder's other obligations with
amortizable bond premium or market discount. In applying the constant yield
method, the Note is treated as if (i) it is issued for the holder's adjusted
basis immediately after its acquisition by the holder, (ii) it is issued on the
holder's acquisition date, and (iii) no payments provided for in the Note are
qualified stated interest payments. The election may not be revoked without
the approval of the Internal Revenue Service.
BACKUP WITHHOLDING
A 31% "backup" withholding tax may apply to payments of principal, premium
and interest (including original issue discount, if any) made to, and the
proceeds of disposition of a Note by, certain noncorporate holders. Backup
withholding will apply if a United States holder (i) fails to furnish a
Taxpayer Identification Number ("TIN") (social security number or employer
identification number) or (ii) under certain circumstances, fails to certify
that the TIN
S-17
furnished by the holder is correct and that the holder has not been notified by
the Internal Revenue Service that the holder is subject to backup withholding
for failure to report interest and dividend payments. Backup withholding will
also apply if the payor is notified by the Internal Revenue Service that the
payee has failed to report properly a correct TIN or interest and dividends
earned by such payee.
Any amounts withheld from a payment to a holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided the required information is furnished to the Internal Revenue Service.
THE FEDERAL INCOME TAX SUMMARY SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR
SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through
the Agents, which have agreed to use their reasonable best efforts to solicit
offers to purchase the Notes. The Company will have the sole right to accept
offers to purchase Notes and may reject any proposed purchase of Notes in whole
or in part. Each Agent will have the right, in its discretion, to reject any
offer to purchase Notes, in whole or in part, that it considers to be
unacceptable. Payment of the purchase price of Notes will be required to be
made in immediately available funds. The Company will pay to each Agent a
<PAGE>
commission, in connection with sales of Notes to purchasers solicited by such
Agent, ranging from .125% to .750% of the principal amount of Notes so sold,
depending upon the maturity of the Notes. The Company reserves the right to
sell Notes through agents other than those named herein or directly on its own
behalf, in which case no commission will be payable to the Agents on any Notes
sold directly by the Company.
The Company may also sell Notes to one or more of the Agents as principals
for their own accounts at a discount to be agreed upon at the time of sale.
Such Notes may be resold to investors and other purchasers at prevailing market
prices, or prices related thereto at the time of such resale or otherwise, as
determined by the applicable Agent. In addition, the Agents may offer the
Notes they have purchased as principal to other dealers. The Agents may sell
Notes to any dealer at a discount and in connection with fixed price offerings,
unless otherwise specified in the applicable pricing supplement, such discount
allowed to any dealer will not be in excess of 662/3% of the discount to be
received by such Agent from the Company. Unless otherwise indicated in the
applicable pricing supplement, any Note sold to an Agent as principal will be
purchased by such Agent at a price equal to 100% of the principal amount
thereof less a percentage equal to the commission applicable to any agency sale
of a Note of identical maturity, and may be resold by the Agent to investors
and other purchasers 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 or may be resold to certain dealers as described
above. After the initial public offering of Notes to be resold to investors
and other purchasers on a fixed public offering price basis, the public
offering price, concession and discount may be changed.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended, in respect of the Notes. The Company and
the Agents have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments
made in respect thereof. The Company has also agreed to reimburse the Agents
for certain expenses.
The Company does not intend to apply for the listing of the Notes on a
national securities exchange. The Agents may from time to time purchase and
sell Notes in the secondary market, but are not obligated to do so, and there
can be no assurance that there will be a secondary market for the Notes nor as
to their liquidity in a secondary market if one develops. From time to time,
the Agents may make a market in the Notes.
The Agents in the ordinary course of their business engage from time to
time in securities transactions with and perform investment banking services
for the Company. Mr. Peter M. Flanigan, a Director of Dillon, Read & Co. Inc.,
is a Director of the Company. Douglas A. Warner III, the President, Chief
Executive Officer and Chairman of the Board of Directors of J.P. Morgan & Co.
Incorporated, the parent company of J.P. Morgan Securities Inc., is a Director
of the Company.
S-18
<PAGE>
<TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of the Company's earnings to
fixed charges, on a consolidated basis, for the periods indicated:
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ --------------------------------------------
1994 1993 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
<C> <C> <C> <C> <C> <C> <C>
8.4x 5.2x <F1> 5.2x <F1> 7.8x 6.4x 5.1x 6.6x
<FN>
<F1>
Includes the impact of the one-time, pretax restructuring charge of $565
million as a result of the Company's Profitability Enhancement Program.
Excluding the non-recurring special charge, the ratio would have been 8.3X for
the nine months ended September 30, 1993 and 7.6X for year ended December 31,
1993.
</FN>
</TABLE>
For purposes of this ratio, earnings have been calculated by adding to
income before income taxes the amount of fixed charges. Fixed charges consist
of interest on all indebtedness, amortization of debt discount and that portion
of rental expense deemed to represent interest.
EXPERTS
The consolidated financial statements of the Company incorporated in the
accompanying Prospectus by reference to the Company's Annual Report on Form 10-
K for the year ended December 31, 1993, have been so incorporated in reliance
on the report of Price Waterhouse, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
S-19
<PAGE>
============================== ==============================
ANHEUSER-BUSCH
COMPANIES, INC.
---------- ----------
TABLE OF CONTENTS $140,000,000
MEDIUM-TERM NOTES
PROSPECTUS SUPPLEMENT
Page
----
Description of Notes . . S-2
Foreign Currency Risks . S-12
United States Taxation . S-12
Plan of Distribution . . S-18 [CORPORATE LOGO]
Ratio of Earnings to
Fixed Charges . . . . . . S-19
Experts . . . . . . . . . S-19
PROSPECTUS
Available Information . . . 2
Incorporation of ----------
Documents by Reference . . 2
The Company . . . . . . . . 3 PROSPECTUS SUPPLEMENT
Use of Proceeds . . . . . . 3
Description of Debt ----------
Securities . . . . . . . . 3
Plan of Distribution . . . 8
Legal Opinion . . . . . . . 9
Experts . . . . . . . . . . 9
Dillon, Read & Co. Inc.
---------- Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
Morgan Stanley & Co.
Incorporated
============================== ==============================
<PAGE>
STATEMENT OF DIFFERENCES
The Prospectus Supplement filed herewith will be attached to and made a
part of the February 9, 1995 Prospectus with the first nineteen pages of the
Prospectus booklet, plus the outside back cover, comprise the Prospectus
Supplement. The upper left-hand corner of the outside front cover of the
circulated Prospectus Supplement, and the right-hand column of the back cover
beneath the words "Medium-Term Notes," each will contain a one inch square
corporate logo of Anheuser-Busch Companies, Inc. The corporate logo consists
of a silver "A" and a white eagle on a blue background.
