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Rule No. 424(b)(3)
Registration No. 33-52647
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED MARCH 24, 1994
PROSPECTUS SUPPLEMENT
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(To Prospectus Supplement dated October 4, 1993 and Prospectus dated August 27,
1993)
MERRILL LYNCH & CO., INC.
GROWTH AND INCOME NOTES/SM/
DUE APRIL 30, 2009
Original Issue Date: April 28, 1994 Principal Amount: U.S. $50 million
Maturity Date: April 30, 2009 Coupon Interest Rate: Years 1-10: 0%
Interest Payment Dates: On each Years 11-15: ____%
April 30 and October 30 commencing Yield to Maturity: ____%
October 30, 2004
DESCRIPTION OF THE NOTES
GENERAL
The Medium-Term Notes, Series B of Merrill Lynch & Co., Inc. (the
"Company"), offered hereby are "Growth and Income Notes/SM/" and are referred to
in this Prospectus Supplement as the "Notes". The Notes are Fixed Rate Notes
and Original Issue Discount Notes and certain provisions of the Notes are more
fully described in the accompanying Prospectus and Prospectus Supplement. The
Notes will be issued as Book-Entry Notes in denominations of U.S. $1,000 and
integral multiples of $1,000 in excess thereof.
On February 10, 1994, the Company increased to $3,650,000,000 the aggregate
principal amount of Medium-Term Notes, Series B authorized to be issued pursuant
to the attached Prospectus Supplement and supplements related thereto. Such
amount represents an increased authorization of $650,000,000.
The Notes will not be subject to redemption by the Company in whole or in
part prior to the Maturity Date.
The issue price of each $1,000 principal amount of the Notes will be
$500.00 (50% of its principal amount at maturity). Each Note will be
represented by one or more fully registered global securities. Each such global
security will be deposited with, or on behalf of, the Depository Trust Company
as Depository (the "Depository") registered in the name of the Depository or a
nominee thereof. Beneficial owners will not be entitled to receive definitive
certificates representing Notes. The ownership interest of each actual
purchaser of each Note (a "beneficial owner") will be recorded on or through the
records of the brokerage firm or other entity that maintains a beneficial
owner's account. See "Book-Entry Notes" in the attached Prospectus Supplement
dated October 4, 1993.
This Prospectus Supplement relates to $50,000,000 aggregate principal
amount of Notes which the Company has agreed to sell to Merrill Lynch, Pierce,
Fenner & Smith Incorporated (the "Underwriter"), and which the Underwriter has
agreed to purchase from the Company, at a price of ____% of the principal amount
thereof. The Underwriter has advised the Company that it proposes initially to
offer the Notes to the public at a public offering price equal to ___% of the
principal amount thereof. After the initial public offering, such public
offering price may be changed.
Application has been made for the listing of the Notes on the New York
Stock Exchange, Bond Floor. There can be no assurance as to how the Notes will
trade in the secondary market or whether such market will be liquid.
The date of this Prospectus Supplement is March __, 1994.
/SM/"Growth and Income Notes" is a service mark of Merrill Lynch & Co., Inc.
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PRINCIPAL REPAYMENT
The Notes are being issued at a substantial discount from their principal
amount payable at maturity. Calculation of the accrual of Original Issue
Discount (the difference between the principal amount and the issue price of a
Note), in the period prior to April 30, 2004, will be on a semiannual bond
equivalent basis (using a year composed of twelve 30-day months and semiannual
compounding). Prospective purchasers of the Notes should be aware that,
although there will be no periodic payments of interest on the Notes prior to
October 30, 2004, accrued original issue discount (as such term is used in
"Certain United States Federal Income Tax Considerations" below) will be
includible periodically in a beneficial owner's gross income for United States
Federal income tax purposes prior to and until any disposition of the Notes or
their maturity. See "Certain United States Federal Income Tax Considerations"
for a detailed discussion of the United States Federal income tax consequences
regarding the purchase, ownership and disposition of the Notes.
In case an Event of Default (as defined in the attached Prospectus dated
August 27, 1993) with respect to the Notes shall have occurred and be
continuing, the amount payable to a Holder of a Note upon any acceleration
permitted by the Notes will be equal to (a) if prior to April 30, 2004, the sum
of (i) the issue price of the Notes plus (ii) Original Issue Discount accrued
thereon to the date of acceleration at a rate of ____% per annum, calculated on
a semiannual bond equivalent basis, and (b) if on or subsequent to April 30,
2004, the sum of (i) $1,000 plus (ii) accrued but unpaid Coupon Interest, if
any.
INTEREST
In addition to the Original Issue Discount, the Notes will bear interest
(the "Coupon Interest") on the principal amount of each Note at a per annum rate
of ____% (the "Coupon Interest Rate") from April 30, 2004, payable semiannually
on April 30 and October 30 of each year, commencing October 30, 2004. Coupon
Interest on the Notes will be computed on the basis of a 360-day year of twelve
30-day months. Coupon Interest payable on the Maturity Date will be payable to
the person to whom the principal amount is payable.
The yield to maturity of the Notes, which includes accrued Original Issue
Discount and payments of Coupon Interest, calculated on a semiannual bond
equivalent basis, is ____%.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Set forth in full below is the opinion of Brown & Wood, counsel to the
Company, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the Notes. Such opinion is based upon
laws, regulations, rulings and decisions now in effect, all of which are subject
to change (including changes in effective dates) or possible differing
interpretations. The discussion below deals only with Notes held as capital
assets and does not purport to deal with persons in special tax situations, such
as financial institutions, insurance companies, regulated investment companies,
dealers in securities or currencies, persons holding Notes as a hedge against
currency risks or as a position in a "straddle" for tax purposes, or persons
whose functional currency is not the United States dollar. It also does not
deal with holders other than original purchasers who purchase a Note for an
amount equal to 50% of its principal amount. Persons considering the purchase
of the Notes should consult their own tax advisors concerning the application of
United States Federal income tax laws to their particular situations as well as
any consequences of the purchase, ownership and disposition of the Notes arising
under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any other
person whose income or gain in respect of a Note is effectively connected with
the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a holder of a Note that is not a U.S. Holder.
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U.S. HOLDERS
On January 27, 1994, the Internal Revenue Service ("IRS") issued final
Treasury regulations (the "OID Regulations") under the original issue discount
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), which
replaced the Proposed OID Regulations (as described in the accompanying
Prospectus Supplement dated October 4, 1993). The OID Regulations generally
apply to debt instruments issued on or after April 4, 1994; therefore by their
terms they would apply to the Notes. The following discussion is based upon the
original issue discount provisions of the Code and the OID Regulations.
For United States Federal income tax purposes, a debt instrument will be
treated as having been issued with original issue discount to the extent that
the stated redemption price at maturity of the debt instrument exceeds its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
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of the debt instrument's stated redemption price at maturity multiplied by the
number of complete years to its maturity from its issue date). The issue price
of an issue of debt instruments equals the first price at which a substantial
amount of such debt instruments has been sold. The stated redemption price at
maturity of a debt instrument is the sum of all payments provided by the debt
instrument other than "qualified stated interest" payments. The term "qualified
stated interest" generally means stated interest that is unconditionally payable
in cash or property (other than debt instruments of the issuer) at least
annually at a single fixed rate. Based upon the foregoing, since the amounts
payable with respect to a Note on the Interest Payment Dates based upon the
Coupon Interest Rate (the "Coupon Interest Payments") are only payable during
the last five years of the term of the Notes and therefore do not constitute
qualified stated interest payments, the Notes will be treated as having been
issued with original issue discount in an amount equal to the excess of the sum
of the principal amount thereof and the Coupon Interest Payments over the Note's
issue price.
A U.S. Holder of a Note must include such original issue discount in income
as ordinary interest for United States Federal income tax purposes as it accrues
under a constant yield method over the entire term of the Note in advance of
receipt of the cash payments attributable to such income, regardless of such
U.S. Holder's regular method of tax accounting. In general, the amount of
original issue discount includible in income by the initial U.S. Holder of a
Note will equal the sum of the daily portions of original issue discount with
respect to such Note for each day during the taxable year (or portion of the
taxable year) on which such U.S. Holder held such Note. The "daily portion" of
original issue discount on any Note will be determined by allocating to each day
in any accrual period a ratable portion of the original issue discount allocable
to that accrual period. An "accrual period" may be of any length and the
accrual periods may vary in length over the term of the Note, provided that each
accrual period is no longer than one year and 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 amount of original issue discount
allocable to each accrual period will generally equal the product of the Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period). The "adjusted issue price" of a Note at the
beginning of any accrual period will equal the sum of the issue price of the
Note plus the amount of original issue discount allocable to all prior accrual
periods minus the amount of any prior Coupon Interest Payments on the Note.
Under the foregoing rules, since the Coupon Interest Payments will be treated as
original issue discount for United States Federal income tax purposes and will
be includible in income by a U.S. Holder over the entire term of the Note
(regardless of the U.S. Holder's regular method of tax accounting), the Coupon
Interest Payments will constitute payments of principal, for United States
Federal income tax purposes, at the time such payments are made.
Upon the sale, exchange or retirement of a Note, a U.S. Holder generally
will be required to recognize taxable gain or loss in an amount equal to the
difference, if any, between the amount realized on such sale, exchange or
retirement and such U.S. Holder's adjusted tax basis in the Note. A U.S.
Holder's adjusted tax basis in a Note generally will equal such U.S. Holder's
initial investment in the Note increased by any original issue discount included
in income by such U.S. Holder and decreased by the amount of any payments
(including Coupon Interest Payments) received by such U.S. Holder with respect
to such Note. Such gain or loss will generally be long-term capital gain or
loss if the Note were held by the U.S. Holder for more than one year.
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NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount) on a Note, unless such non-U.S. Holder is a direct or indirect 10% or
greater shareholder of the Company, a controlled foreign corporation related to
the Company or a bank receiving interest described in section 881(c)(3)(A) of
the Code. To qualify for the exemption from taxation, the last United States
payor in the chain of payment prior to payment to a non-U.S. Holder (the
"Withholding Agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar years,
a statement that (i) is signed by the beneficial owner of the Note under
penalties of perjury, (ii) certifies that such owner is not a U.S. Holder and
(iii) provides the name and address of the beneficial owner. The statement may
be made on an IRS Form W-8 or a substantially similar form, and the beneficial
owner must inform the Withholding Agent of any change in the information on the
statement within 30 days of such change. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the Withholding Agent.
However, in such case, the signed statement must be accompanied by a copy of the
IRS Form W-8 or the substitute form provided by the beneficial owner to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would establish
an exemption from backup withholding for those non-U.S. Holders who are not
exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.
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