<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 1995
REGISTRATION NO. 33-61559
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
AMENDMENT NO. 2 AND POST-EFFECTIVE AMENDMENTS
UNDER
THE SECURITIES ACT OF 1933
--------------
MERRILL LYNCH & CO., INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-2740599 (I.R.S.
(STATE OR OTHER JURISDICTION EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1334
(212) 449-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
ROSEMARY T. BERKERY, ESQ.
ASSOCIATE GENERAL COUNSEL
MERRILL LYNCH & CO., INC.
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1334
(212) 449-6990
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
NORMAN D. SLONAKER, ESQ. DONALD R. CRAWSHAW, ESQ.
BROWN & WOOD SULLIVAN & CROMWELL
ONE WORLD TRADE CENTER 125 BROAD STREET
NEW YORK, NEW YORK 10048 NEW YORK, NEW YORK 10004
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after the effective date of this Registration Statement as determined by
market conditions.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED
OF SECURITIES TO AMOUNT TO BE AGGREGATE MAXIMUM AGGREGATE AMOUNT OF
BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Debt Securities and War-
rants.................. $4,000,000,000(2) 100% $4,000,000,000 $1,379,320(3)
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee.
(2) Such amount shall be increased, if any Senior or Subordinated Debt
Securities are issued at an original issue discount, by an amount such that
the net proceeds to be received by the Registrant shall be equal to the above
amount to be registered. Any offering of Senior or Subordinated Debt
Securities denominated other than in U.S. dollars will be treated as the
equivalent in U.S. dollars based on the official exchange rate applicable to
the purchase of such Senior or Subordinated Debt Securities from the
Registrant.
(3) Fee paid with initial filing.
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
included in this Post-Effective Amendment relates to the remaining unsold Debt
Securities and Warrants having an aggregate principal amount of $592,953,046
which were previously registered by the Registrant under Registration
Statement No. 33-52647 on Form S-3. The following registration statements,
each having the original effective date indicated parenthetically, are amended
hereby (the number of such post-effective amendment applicable to a
registration statement being also indicated parenthetically), all as follows:
2-78338 (July 23, 1982-No. 18); 2-83477 (May 9, 1983-No. 17); 2-89519
(February 23, 1984-No. 16); 2-96315 (March 20, 1985-No. 14); 33-03079
(February 6, 1986-No. 13); 33-03602 (April 15, 1986-No. 10); 33-05125 (April
28, 1986-No. 2); 33-09910 (November 5, 1986-No. 11); 33-16165 (August 11,
1987-No. 10); 33-17965 (November 5, 1987-No. 9); 33-19820 (January 29, 1988-
No. 9); 33-23605 (August 16, 1988-No. 8); 33-27512 (March 20, 1989-No. 7); 33-
27594 (March 20, 1989-No. 7); 33-35456 (August 10, 1990-No. 7); 33-38879
(February 12, 1991-No. 6); 33-42041 (August 16, 1991-No. 6); 33-45327
(February 12, 1992-No. 5); 33-54218 (November 19, 1992-No. 4); 33-49947
(August 25, 1993-No. 3); 33-51489 (January 14, 1994-No. 2) and 33-52647 (March
22, 1994-No. 1). Each such post-effective amendment shall hereafter become
effective concurrently with the effectiveness of this Post-Effective Amendment
in accordance with Section 8(c) of the Securities Act of 1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, ISSUE DATE: AUGUST 22, 1995
LOGO
MERRILL LYNCH & CO., INC.
DEBT SECURITIES AND WARRANTS
Merrill Lynch & Co., Inc. (the "Company") intends to sell from time to time
up to $4,592,953,046 aggregate principal amount (or net proceeds in the case of
warrants and in the case of securities issued at an original issue discount),
or its equivalent in such foreign currencies or units of two or more
currencies, based on the applicable exchange rate at the time of offering, as
shall be designated by the Company at the time of offering, of its senior debt
securities ("Senior Debt Securities"), subordinated debt securities
("Subordinated Debt Securities" and, together with the Senior Debt Securities,
the "Debt Securities"), warrants to purchase Debt Securities ("Debt Warrants"),
warrants entitling the holders thereof to receive from the Company a payment or
delivery determined by reference to decreases or increases in the level of an
index or portfolio based on one or more equity or debt securities (including
the price or yield of such securities), any statistical measure of economic or
financial performance (including any consumer price, currency or mortgage
index) or the price or value of any commodity or a combination thereof (the
"Index Warrants") and warrants to receive from the Company the cash value in
U.S. dollars of the right to purchase ("Currency Call Warrants") or to sell
("Currency Put Warrants" and, together with the Currency Call Warrants, the
"Currency Warrants") such foreign currencies or units of two or more currencies
as shall be designated by the Company at the time of offering. The Debt
Securities, Debt Warrants, Index Warrants and Currency Warrants, which are
collectively called the "Securities", may be offered either jointly or
separately and will be offered to the public on terms determined by market
conditions at the time of sale and set forth in a prospectus supplement.
The Securities will be unsecured and, except in the case of Subordinated Debt
Securities, will rank equally with all other unsecured and unsubordinated
indebtedness of the Company. The Subordinated Debt Securities will be
subordinated to all existing and future Senior Indebtedness of the Company.
Each issue of Securities may vary, where applicable, as to aggregate
principal amount, maturity date, public offering or purchase price, interest
rate or rates, if any, and timing of payments thereof, provision for
redemption, sinking fund requirements, if any, exercise provisions, currencies
of denomination or currencies otherwise applicable thereto and any other
variable terms and method of distribution. The accompanying Prospectus
Supplement (the "Prospectus Supplement") sets forth the specific terms with
regard to the Securities in respect of which this Prospectus is being
delivered. The Company may elect to deliver to purchasers of Securities an
abbreviated term sheet setting forth a description of the Securities being
offered, or a summary thereof (a "Terms Sheet"), instead of a Prospectus
Supplement. This Prospectus may be delivered prior to or concurrently with a
Terms Sheet.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The Securities may be sold directly or through Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") as agent or may be
offered and reoffered through, or through underwriting syndicates managed or
co-managed by, one or more of the following: MLPF&S; Bear, Stearns & Co. Inc.;
Donaldson, Lufkin & Jenrette Securities Corporation; CS First Boston
Corporation; Goldman, Sachs & Co.; Lehman Brothers Inc.; Morgan Stanley & Co.
Incorporated; Nomura Securities International, Inc.; PaineWebber Incorporated;
and Salomon Brothers Inc, or directly to purchasers by the Company. The Company
has entered into agreements with such firms with respect to the Securities
providing for agency sales of the Securities through MLPF&S or the purchase and
offering from time to time by one or more of such firms, either alone or with
the several members of any syndicate formed by them. Additional agreements
respecting the distribution of the Securities may be entered into from time to
time by the Company. Securities may not be sold without delivery of a
Prospectus Supplement describing such issue of Securities and the method and
terms of offering thereof or of a Terms Sheet.
-----------
The date of this Prospectus is , 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports, proxy and
information statements and other information concerning the Company may also be
inspected at the offices of the New York Stock Exchange, the American Stock
Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995 and
June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995, January
23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March 9, 1995,
April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21, 1995, August
1, 1995, and August 2, 1995 filed pursuant to Section 13 of the Exchange Act,
are hereby incorporated by reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
(WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE)
OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T. RUSSO, SECRETARY,
MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR, NEW YORK, NEW YORK
10080-6512; TELEPHONE NUMBER (212) 602-8435.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its subsidiaries
and affiliates, provides investment, financing, insurance, and related services
on a global basis. Its principal subsidiary, MLPF&S, one of the largest
securities firms in the world, is a leading broker in securities, options
contracts, and commodity and financial futures contracts; a leading dealer in
options and in corporate and municipal securities; a leading investment banking
firm that provides advice to, and raises capital for, its clients; and an
underwriter of selected insurance products. Other subsidiaries provide
financial services on a global basis similar to those of MLPF&S and are engaged
in such other activities as international banking, lending, and providing other
investment and financing services. Merrill Lynch International Incorporated,
through subsidiaries and affiliates, provides investment, financing, and
related services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by the
U.S. Government and by Federal agencies or instrumentalities. Merrill Lynch
Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and Merrill
Lynch Capital Markets PLC are the Company's primary derivative product dealers
and enter into interest rate and currency swaps and other derivative
transactions as intermediaries and as principals. Merrill Lynch Asset
Management, L.P., with its related affiliates, is one of the largest mutual
fund managers in the world and provides investment advisory services. The
Company's insurance underwriting operations consist of the underwriting of life
insurance and annuity products. Banking, trust, and mortgage lending operations
conducted through subsidiaries of the Company include issuing certificates of
deposit, offering money market deposit accounts, making secured loans, and
providing foreign exchange facilities and other related services.
The principal executive office of the Company is located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281; its telephone
number is (212) 449-1000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Securities
for general corporate purposes. Such uses may include the funding of
investments in, or extensions of credit to, its subsidiaries, the funding of
assets held by the Company or its subsidiaries, including securities
inventories, customer receivables and loans (including business loans, home
equity loans and loans in connection with investment banking-related merger and
acquisition activities) and the lengthening of the average maturity of the
Company's borrowings (including the refunding of maturing indebtedness). The
precise amount and timing of investments in, and extensions of credit to, its
subsidiaries will depend upon their funding requirements and the availability
of other funds to the Company and its subsidiaries. Pending such applications,
the net proceeds will be temporarily invested or applied to the reduction of
short-term indebtedness. A substantial portion of the proceeds from the sale of
any Currency Warrants or Index Warrants may be used to hedge market risks with
respect to such Warrants. Management of the Company expects that it will, on a
recurrent basis, engage in additional financings as the need arises to finance
the growth of the Company or to lengthen the average maturity of its
borrowings. To the extent that Securities being purchased for resale by MLPF&S
are not resold, the aggregate proceeds to the Company and its subsidiaries
would be reduced.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary of consolidated financial information was derived
from, and is qualified in its entirety by reference to, the financial
statements, condensed financial statements, and other information and data
contained in the Company's Annual Report on Form 10-K for the year ended
December 30, 1994, and Quarterly Report on Form 10-Q for the period ended June
30, 1995 (the "Quarterly Report"). See "Incorporation of Certain Documents by
Reference." The condensed consolidated financial statements contained in the
Quarterly Report are unaudited; however, in the opinion of management of the
Company, all adjustments (consisting only of normal recurring accruals)
necessary for a fair statement of the results of operations have been
included. The year-end results include 52 weeks for 1990, 1991, 1992, and 1994
and 53 weeks for 1993.
The Company conducts its business in highly volatile markets. Consequently,
the Company's results can be affected by many factors, including general
market conditions, the liquidity of secondary markets, the level and
volatility of interest rates and currency values, the valuation of securities
positions, competitive conditions, and the size, number, and timing of
transactions. In periods of unfavorable market activity, profitability can be
adversely affected because certain expenses remain relatively fixed. As a
result, net earnings and revenues can vary significantly from period to
period. Thus, interim results may not necessarily be representative of the
full year results of operations.
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN DECEMBER SIX MONTHS ENDED
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JULY 1, JUNE 30,
1990 1991 1992 1993 1994 1994 1995
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<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
INFORMATION
(In thousands, except
ratios)
Revenues................ $11,147,229 $12,352,812 $ 13,412,668 $ 16,588,177 $ 18,233,091 $ 9,219,111 $ 10,788,871
Net revenues(1)......... $ 5,783,329 $ 7,246,468 $ 8,577,401 $ 10,558,230 $ 9,624,521 $ 5,229,547 $ 4,969,677
Earnings before income
taxes and cumulative
effect of changes in
accounting
principles(2).......... $ 282,328 $ 1,017,418 $ 1,621,389 $ 2,424,808 $ 1,729,604 $ 1,084,870 $ 843,092
Cumulative effect of
changes in accounting
principles (net of
applicable income
taxes)(2).............. -- -- $ (58,580) $ (35,420) -- -- --
Net earnings(2)......... $ 191,856 $ 696,117 $ 893,825 $ 1,358,939 $ 1,016,761 $ 623,568 $ 510,071
Ratio of earnings to
fixed charges(3)....... 1.1 1.2 1.3 1.4 1.2 1.3 1.1
BALANCE SHEET
INFORMATION(4)(5)
(In thousands)
Total assets............ $68,129,527 $86,259,343 $107,024,173 $152,910,362 $163,749,327 $174,006,536 $174,852,533
Long-term borrowings.... $ 6,341,559 $ 7,964,424 $ 10,871,100 $ 13,468,900 $ 14,863,383 $ 15,289,293 $ 15,703,594
Stockholders' equity.... $ 3,225,430 $ 3,818,088 $ 4,569,104 $ 5,485,913 $ 5,817,545 $ 5,628,394 $ 5,883,238
</TABLE>
- --------
(1) Net revenues are revenues net of interest expense.
(2) Net earnings for 1992 were reduced by $58,580,000 to reflect the adoption
of Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," and
SFAS No. 109, "Accounting for Income Taxes." Net earnings for 1993 were
reduced by $35,420,000 to reflect the adoption of SFAS No. 112, "Employers'
Accounting for Postemployment Benefits."
(3) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
(4) In 1994, the Company adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts,"
and FASB Interpretation No. 41, "Offsetting of Amounts Related to Certain
Repurchase and Reverse Repurchase Agreements," which increased assets and
liabilities at December 30, 1994 by approximately $8,500,000,000.
(5) To finance its diverse activities, the Company and certain of its
subsidiaries borrow substantial amounts of short-term funds on a regular
basis. Although the amount of short-term borrowings significantly varies
with the level of general business activity, on June 30, 1995,
$753,051,000 of bank loans and $14,975,863,000 of commercial paper were
outstanding. In addition, certain of the Company's subsidiaries lend
securities and enter into repurchase agreements to obtain financing. At
June 30, 1995, cash deposits for securities loaned and securities sold
under agreements to repurchase amounted to $3,614,152,000 and
$52,491,110,000, respectively. From July 1, 1995 to August 14, 1995, long-
term borrowings, net of new issuances and resales, decreased by
approximately $163,176,000.
4
<PAGE>
FISCAL YEAR 1994
Financial markets, strong from 1991 through the first six weeks of 1994,
changed significantly after inflationary fears prompted the Federal Reserve to
increase short-term interest rates in February 1994. As the U.S. economy
continued to expand, the Federal Reserve acted to further curb inflation and to
moderate growth by increasing short-term interest rates five additional times
during the year. The combination of rising interest rates, a falling U.S.
dollar, unsettled global stock, bond, and currency markets, reduced foreign
investment in U.S. financial markets, and overall investor caution contributed
to lower earnings for most U.S. securities firms. These conditions affected the
Company's 1994 fourth quarter and full year results. Net earnings for the 1994
fourth quarter were $161.6 million, down 30% from the 1994 third quarter and
down 53% from the 1993 fourth quarter.
Net earnings for 1994 were $1,016.8 million, down 25% from record 1993
earnings of $1,358.9 million. Net earnings for 1993 included a $35.4 million
cumulative effect charge (net of $25.1 million of applicable income tax
benefits) related to the adoption of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits." Earnings
for 1993 before the cumulative effect of the change in accounting principle
were $1,394.4 million. Earnings per common share in 1994 were $4.75 primary and
$4.74 fully diluted, compared with $5.98 primary and $5.95 fully diluted ($6.14
primary and $6.11 fully diluted before the accounting change) in 1993. As
previously reported, 1993 results included a non-recurring pretax lease charge
totaling $103.0 million ($59.7 million after income taxes) related to the
Company's decision not to occupy certain space at the World Financial Center
Headquarters ("Headquarters") facility. This space was sublet in 1994.
Total revenues were $18,233 million, up 10% from 1993. Net revenues (revenues
after interest expense) totaled $9,625 million in 1994, down 9% from 1993.
Commission revenues were $2,871 million, virtually unchanged from $2,894
million in 1993. Higher commission revenues from mutual funds and commodity
transactions were offset by lower revenues from money market instruments,
particularly medium-term notes, and listed securities transactions. Sales of
mutual funds, particularly front-end funds, declined as investors were less
active due to uncertain markets and rising interest rates. For the first time
since 1974, both stock and bond funds fell in value industrywide, on average,
in the same year. Distribution fees from deferred charge funds benefited from
strong mutual fund sales in prior periods, while redemption fees increased as
investors repositioned their portfolios primarily from fixed-income funds to
stock and money market funds. Commissions on listed securities transactions
decreased due to a decline in the relative amount of business by retail clients
versus institutional clients. Other commission revenues declined principally as
a result of lower commissions from money market instruments, partially offset
by higher revenues from commodity transactions.
Interest and dividend revenues increased 35% to $9,578 million from $7,099
million in 1993. Interest expense, which includes dividend expense, rose 43% to
$8,609 million from $6,030 million in 1993. Net interest and dividend profit
decreased 9% to $969 million as a significant increase in short-term interest
rates, year over year, led to a substantial flattening of the yield curve. The
change in the yield curve, the relationship between interest rates and
maturities, resulted from short-term interest rates rising faster than long-
term interest rates in 1994. As a result, interest spreads declined, while
financing and hedging costs increased from 1993.
Principal transactions revenues fell 20% to $2,335 million from the 1993
record $2,920 million due to rising interest rates, a declining U.S. dollar,
and volatile world financial markets. Revenues from taxable fixed-income
securities, equities and equity derivatives, and foreign exchange and
commodities decreased, while interest rate and currency swaps, and municipal
securities revenues increased. Taxable fixed-income revenues declined 52% to
$462 million as higher interest rates, wider credit spreads, and uncertainty in
emerging markets led to reduced demand and lower inventory values. Equities and
equity derivatives trading revenues decreased 28% to $627 million, reflecting
lower trading results in virtually all categories, including a loss in
5
<PAGE>
convertible securities. Foreign exchange and commodities revenues, in the
aggregate, declined 31% to $109 million. Weakness in the U.S. dollar versus
other major currencies depressed foreign exchange trading, while commodities
trading revenues benefited from increased volume. Interest rate and currency
swaps revenues advanced 24% to $749 million reflecting higher revenues from
U.S. dollar-denominated swap trading activities, particularly those related to
structured financing transactions. Municipal securities trading revenues
increased 20% to $388 million due to strong retail investor demand for tax-
exempt investments.
Investment banking revenues were $1,239 million, down 32% from $1,831 million
in 1993 due primarily to the effects of rising interest rates and reduced
demand. Underwriting revenues declined in almost all categories, with
significant decreases in equities, corporate bonds and preferred stock, and
convertible securities. Strategic services revenues, which include fees for
debt restructuring, merger and acquisition activity, and other advisory
services, benefited from increased merger and acquisition advisory assignments
in various industries.
Asset management and portfolio services fees rose 12% from $1,558 million in
1993 to a record $1,739 million. Asset management fees advanced due primarily
to an increase in stock funds under management. Portfolio service fees advanced
due to the continued growth in the number of Asset Power (Registered Trademark)
accounts, a product with fees and transaction limits based on asset levels, and
increased revenues from the ML Consults (Registered Trademark) product.
Other revenues were $471 million, up 65% from $285 million in 1993. The
increase in other revenues was attributable to net realized investment gains
related to merchant banking activities of $81 million, compared with unrealized
losses of $133 million in 1993.
Non-interest expenses were $7,895 million, down 3% from $8,133 million in the
year-ago period. Excluding the 1993 non-recurring lease charge totaling $103.0
million, non-interest expenses declined 2%.
Compensation and benefits expense, which represented approximately 63% of
total non-interest expenses, declined 6% due principally to lower incentive and
production-related compensation. Compensation and benefits expense, as a
percentage of net revenues, was 51.5% in 1994, compared with 49.8% in 1993.
Occupancy costs declined 24% (7% excluding the 1993 non-recurring lease
charge) benefiting from continued relocation of support staff to lower-cost
facilities and reduced space requirements at the Headquarters facility. Other
facilities costs, which include communications and equipment rental, and
depreciation and amortization, were up 9% due to increased use of market data,
news, and statistical services and higher depreciation expense from the
acquisition of technology-related equipment.
Advertising and market development expenses were down 1% with discretionary
costs decreasing as business conditions became less favorable. Lower sales
promotion and a reduction in advertising campaigns were partially offset by
increased travel related to international business activities. Professional
fees increased 26% due primarily to the use of system and management
consultants to upgrade technology and processing capabilities in trading,
credit, and customer services, as well as higher legal fees. Brokerage,
clearing, and exchange fees increased 20% reflecting higher international
equity volume and expanded risk management activities related to volatile
global market conditions. Other expenses increased 1% from 1993, due to an
increase in office supplies and postage costs.
Income tax expense totaled $713 million in 1994, down 31% from $1,030 million
in 1993. The effective tax rate was 41.2% in 1994 versus 42.5% in 1993 as a
result of lower state income taxes.
The Company's Annual Report on Form 10-K for the year ended December 30, 1994
describes an action commenced against the Company by Orange County, California
(the "County") and the Orange County Investment Pools (the "Pools"). See
"Incorporation of Certain Documents by Reference." The County and
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the Pools seek relief in excess of $2 billion in connection with various
securities transactions between the County and/or the Pools and the Company and
its subsidiaries. Other actions have also been commenced against the Company
and its subsidiaries arising out of the Company's dealings with the County
Treasurer and the Pools.
The Company will vigorously contest these actions and believes it has
meritorious defenses. Although the ultimate outcome of these actions cannot be
ascertained at this time and the results of legal proceedings cannot be
predicted with certainty, it is the opinion of management that the resolution
of these actions will not have a material adverse effect on the consolidated
financial condition or results of operations of the Company for the year ended
December 30, 1994.
The Company has also received inquiries from various governmental entities
examining the underlying events and is cooperating with these inquiries.
CERTAIN BALANCE SHEET INFORMATION AS OF DECEMBER 30, 1994
On January 1, 1994, the Company adopted Financial Accounting Standards Board
Interpretation No. 39 ("Interpretation No. 39"), "Offsetting of Amounts Related
to Certain Contracts." Interpretation No. 39 affects the financial statement
presentation of balances related to swap, forward, and other similar exchange
or conditional type contracts, and unconditional type contracts. To offset
unconditional contracts, such as resale and repurchase agreements, net cash
settlement of the related receivable and payable balances is also required by
Interpretation No. 39, as modified by Interpretation No. 41, "Offsetting of
Amounts Related to Certain Repurchase and Reverse Repurchase Agreements." Prior
to the adoption of these Interpretations, the Company followed industry
practice in reporting balances related to certain types of contracts on a net
basis. Unrealized gains and losses for swap, forward, and other similar
contracts were reported net on the balance sheet by contract type, while
certain receivables and payables related to resale and repurchase agreements
were reported net by counterparty. The effect of these Interpretations
increased assets and liabilities at December 30, 1994 by approximately $8.5
billion.
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its market-making,
investment banking, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers and the
liquidity of the market for such securities, in addition to the usual risks
associated with investing in, extending credit, underwriting, and trading in
investment grade instruments.
At December 30, 1994, the fair value of long and short non-investment grade
trading inventories amounted to $3,309 million and $456 million, respectively,
and in the aggregate (i.e., the sum of long and short trading inventories)
represented 4.3% of aggregate consolidated trading inventories.
At December 30, 1994, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $257 million
(excluding unutilized revolving lines of credit and other lending commitments
of $50 million), consisting primarily of senior term and subordinated
financings to 35 medium-sized corporations. At December 30, 1994, the Company
had no bridge loans outstanding. Loans to highly leveraged corporations are
carried at unpaid principal balance less a reserve for estimated losses. The
allowance for loan losses is estimated based on a review of each loan, and
consideration of economic, market, and credit conditions. Direct equity
investments made in conjunction with the Company's investment and merchant
banking activities aggregated $289 million at December 30, 1994, representing
investments in 80 enterprises. Equity investments in privately-held
corporations for which sale is restricted by government or contractual
requirements are carried at the lower of cost or estimated net realizable
value. At December 30, 1994, the Company held interests in partnerships,
totaling $93 million (recorded on the cost basis), that invest
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in highly leveraged transactions and non-investment grade securities. Prior to
July 1, 1994, the Company had a co-investment arrangement to enter into direct
equity investments. At December 30, 1994, the Company also committed to invest
an additional $80 million in partnerships that invest in leveraged
transactions.
The Company's insurance subsidiaries hold non-investment grade securities. As
a percentage of total insurance investments, non-investment grade securities
were 5.5% at December 30, 1994. Non-investment grade securities of insurance
subsidiaries were classified as available-for-sale and were carried at fair
value at December 30, 1994.
At December 30, 1994, the largest non-investment grade concentration
consisted of various issues of a South American sovereign totaling $235
million, of which $60 million represented on-balance-sheet hedges for off-
balance-sheet instruments. No one industry sector accounted for more than 21%
of total non-investment grade positions. At December 30, 1994, the Company held
an aggregate carrying value of $292 million in debt and equity securities of
issuers in various stages of bankruptcy proceedings. Approximately 71% of this
amount resulted from the Company's market-making activities in such securities.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995
Financial markets, which were particularly weak during the last half of 1994,
improved during the first six months of 1995 as a result of a steadying U.S.
economy, declining interest rates, and heightened investor activity. Net
earnings were $227 million in the first quarter of 1995 and $283 million in the
second quarter, or $510 million for the 1995 first-half. Six-month 1995 net
earnings, however, were down 18% from the $624 million reported in the
comparable 1994 period, which included record first quarter net earnings of
$372 million. Total revenues for the first six months of 1995 were $10,789
million, up 17% over the 1994 first-half. Net revenues in the first six months
of 1995 were $4,970 million, down 5% from the comparable 1994 period due
primarily to lower investment banking and commission revenues. Non-interest
expenses were $4,127 million, virtually unchanged from the comparable 1994
period.
Commission revenues were $1,450 million for the first half of 1995, down 7%
from the 1994 first-half, primarily as a result of lower mutual fund revenues.
Mutual fund commissions were affected by lower volumes after the 1994 first
quarter as most stock and bond mutual funds declined in value. Sales of mutual
funds, however, increased during the 1995 second quarter as investors were more
active due to strong performances in both stock and bond markets.
Interest and dividend revenues were $6,325 million for the first half of
1995, up 40% from the comparable 1994 period. Interest expense, which includes
dividend expense, increased 46% from the first half of 1994 to $5,819 million.
Net interest profit declined 4% to $506 million primarily due to a more
significant increase in interest-bearing liabilities relative to the increase
in interest-earning assets during the period, as well as the continued
flattening of the yield curve.
Principal transactions revenues increased 5% from the first half of 1994 to
$1,289 million. Taxable fixed-income trading revenues increased due, in part,
to higher revenues from corporate bonds and preferred stock, high-yield bonds,
and non-U.S. government and agencies securities. Trading results in mortgage-
backed products were negatively affected by reduced market liquidity after the
1994 first quarter and fluctuations in interest rates, leading to a loss. Net
trading results from mortgage-backed products were positive, however, when
combined with related net interest income. Trading revenues in U.S. Government
and agencies securities were down from record 1994 levels as lower interest
rates in the current period reduced volatility. Revenues from interest rate and
currency swaps increased due to slightly higher volumes in non-U.S. dollar and
U.S. dollar denominated transactions. Municipal securities revenues were down
from record 1994 levels as declining interest rates and discussions of possible
tax law changes decreased investor demand. Equities and equity derivatives
trading revenues were virtually unchanged, while foreign exchange and
commodities trading revenues decreased due primarily to lower commodity trading
volume.
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Investment banking revenues were $584 million, down 24% from the first half
of 1994, as domestic and global industrywide underwriting volume declined 24%
and 22%, respectively, compared to volumes in the 1994 first-half. Although
down for the 1995 six-month period, second quarter 1995 industrywide domestic
underwriting volume increased 30% from the 1995 first quarter and 16% from the
1994 second quarter as a result of declining interest rates and stronger stock
and bond markets. Lower underwriting revenues were reported in equities and
high-yield securities, partially offset by higher revenues from corporate debt
and preferred stock issuances, particularly in the 1995 second quarter.
Strategic services revenues, which include merger and acquisition fees and
advisory fees, benefited from increased merger and acquisition advisory
assignments in various industries.
Asset management and portfolio service fees rose 4% from the 1994 first-half
to $913 million, principally as a result of increased fees earned from mutual
fund investor services and asset management activities. Other revenues
decreased 17% from the 1994 first-half to $228 million, due primarily to
realized investment gains in the 1994 period, compared with break-even results
on sales of investments in the 1995 six-month period.
Non-interest expenses were $4,127 million, virtually unchanged from the 1994
first-half. Compensation and benefits expense, which represented approximately
62% of non-interest expenses, decreased 3% from the 1994 first-half due
primarily to lower levels of variable incentive and production-related
compensation. Compensation and benefits expense as a percentage of net revenues
was 51.9% in the first half of 1995, compared with 50.6% in the year-ago
period.
Occupancy costs were virtually unchanged from the 1994 first-half. Other
facilities-related costs, which include communications and equipment rental
expense and depreciation and amortization expense, rose 10% primarily due to
increased usage of market information services, as well as higher depreciation
expense from the purchase of technology-related assets over the past year.
Advertising and market development expenses decreased 8% from the 1994 first-
half primarily due to lower travel and recognition program costs. Professional
fees increased 13% from the year ago period as higher legal fees were partially
offset by lower systems consulting fees. Brokerage, clearing, and exchange fees
increased 2% from the 1994 first-half as a result of higher volumes,
particularly in international markets. Other expenses increased 1% from the
1994 first-half and included a $26 million charge for the write-off of assets
related to a technology contract in the 1995 first quarter.
Income tax expense totaled $333 million for the first half of 1995. The
effective tax rate for the first six months of 1995 was 39.5%, compared with
42.5% in the year-ago period. The decrease in the effective tax rate was
primarily attributable to lower state income taxes, higher tax-exempt interest,
increased deductions for dividends received, and expanded international
business activities.
On July 21, 1995, the Company and Smith New Court PLC ("Smith New Court"), a
U.K.-based global securities firm, announced the terms of a cash offer under
which the Company expects to acquire Smith New Court. In the proposed
transaction, a wholly-owned subsidiary of the Company has offered to acquire
all outstanding capital shares of Smith New Court for cash, with the aggregate
offer valued at approximately $842 million. The transaction is conditioned on,
among other things, the receipt of all required regulatory approvals and is
expected to be completed late in the third quarter or early in the fourth
quarter of 1995.
CERTAIN BALANCE SHEET INFORMATION AS OF JUNE 30, 1995
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
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In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market-making, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers of, and the
liquidity of the market for, such securities, in addition to the usual risks
associated with investing in, financing, underwriting, and trading in
investment grade instruments.
At June 30, 1995, the fair value of long and short non-investment grade
trading inventories amounted to $4,036 million and $455 million, respectively,
and in the aggregate (i.e. the sum of long and short trading inventories),
represented 4.8% of aggregate consolidated trading inventories.
At June 30, 1995, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $246 million
(excluding unutilized revolving lines of credit and other lending commitments
of $96 million), consisting primarily of senior term and subordinated
financings to 37 medium-sized corporations. At June 30, 1995, the Company had
no bridge loans outstanding. Loans to highly leveraged corporations are carried
at unpaid principal balances less a reserve for estimated losses. The allowance
for loan losses is estimated based on a review of each loan, and consideration
of economic, market, and credit conditions. Direct equity investments made in
conjunction with the Company's investment and merchant banking activities
aggregated $238 million at June 30, 1995, representing investments in 72
enterprises. Equity investments in privately-held companies for which sale is
restricted by government or contractual requirements are carried at the lower
of cost or estimated net realizable value. At June 30, 1995, the Company held
interests in partnerships, totaling $102 million (recorded on the cost basis),
that invest in highly leveraged transactions and non-investment grade
securities. At June 30, 1995, the Company also committed to invest an
additional $87 million in partnerships that invest in leveraged transactions.
The Company's insurance subsidiaries hold non-investment grade securities. As
a percentage of total insurance investments, non-investment grade securities
were 4.8% at June 30, 1995. Non-investment grade securities of insurance
subsidiaries are classified as available-for-sale and are carried at fair
value.
At June 30, 1995, the largest non-investment grade concentration consisted of
government and corporate obligations of a Latin American sovereign totaling
$267 million, of which $47 million represented on-balance-sheet hedges for off-
balance-sheet financial instruments. No one industry sector accounted for more
than 19% of total non-investment grade positions. At June 30, 1995, the Company
held an aggregate carrying value of $344 million in debt and equity securities
of issuers in various stages of bankruptcy proceedings or in default, of which
88% of this amount resulted from the Company's market-making activities in such
securities.
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DESCRIPTION OF DEBT SECURITIES
Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities are to be issued under an indenture (the "Chemical Indenture"),
dated as of April 1, 1983, as amended and restated, between the Company and
Chemical Bank (successor by merger to Manufacturers Hanover Trust Company), as
trustee or issued under an indenture (the "Chase Indenture"), dated as of
October 1, 1993 between the Company and The Chase Manhattan Bank, N.A. as
trustee (each, a "Senior Debt Trustee"). The Chemical Indenture and the Chase
Indenture are referred to herein as the "Senior Indentures". The Subordinated
Debt Securities are to be issued under an indenture (the "Subordinated
Indenture"), between the Company and Chemical Bank, as trustee (the
"Subordinated Debt Trustee"). The Senior Debt Securities and Subordinated Debt
Securities may also be issued under one or more other indentures (each, a
"Subsequent Indenture") and have one or more other trustees (each, a
"Subsequent Trustee"). Any Subsequent Indenture relating to Senior Debt
Securities will have terms and conditions identical in all material respects
to the above-referenced Senior Indentures and any Subsequent Indenture
relating to Subordinated Debt Securities will have terms and conditions
identical in all material respects to the above-referenced Subordinated
Indenture, including, but not limited to, the applicable terms and conditions
described below. Any Subsequent Indenture relating to a series of Debt
Securities, and the trustee with respect thereto, will be identified in the
applicable Prospectus Supplement. The Senior Indentures, the Subordinated
Indenture and any Subsequent Indentures (whether senior or subordinated) are
referred to herein as the "Indentures"; and the Senior Debt Trustees, the
Subordinated Debt Trustee and any Subsequent Trustees are referred to herein
as the "Trustees". A copy of each Indenture is filed (or, in the case of a
Subsequent Indenture, will be filed) as an exhibit to the registration
statements relating to the Securities (collectively, the "Registration
Statement"). The following summaries of certain provisions of the Indentures
do not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all provisions of the respective Indentures,
including the definitions therein of certain terms.
GENERAL
Each Indenture provides that Debt Securities (Senior Debt Securities in the
case of the Senior Indentures or a Subsequent Indenture for Senior Debt
Securities, and Subordinated Debt Securities in the case of the Subordinated
Indenture or a Subsequent Indenture for Subordinated Debt Securities) may be
issued thereunder, without limitation as to aggregate principal amount, in one
or more series, by the Company from time to time upon satisfaction of certain
conditions precedent, including the delivery by the Company to the applicable
Trustee of a resolution of the Board of Directors, or the Executive Committee
thereof, of the Company which fixes or provides for the establishment of terms
of such Debt Securities, including: (1) the aggregate principal amount of such
Debt Securities and whether there is any limit upon the aggregate principal
amount of such Debt Securities that may be subsequently issued; (2) the date
on which such Debt Securities will mature; (3) the principal amount payable
with respect to such Debt Securities whether at maturity or upon earlier
acceleration, and whether such principal amount will be determined with
reference to an index, formula or other method; (4) the rate or rates per
annum (which may be fixed or variable) at which such Debt Securities will bear
interest, if any; (5) the dates on which such interest, if any, will be
payable; (6) the provisions for redemption of such Debt Securities, if any,
the redemption price and any remarketing arrangements relating thereto; (7)
the sinking fund requirements, if any, with respect to such Debt Securities;
(8) whether such Debt Securities are denominated or provide for payment in
United States dollars or a foreign currency or units of two or more of such
foreign currencies; (9) the form (registered or bearer or both) in which such
Debt Securities may be issued and any restrictions applicable to the exchange
of one form for another and to the offer, sale and delivery of such Debt
Securities in either form; (10) whether and under what circumstances the
Company will pay additional amounts ("Additional Amounts") in respect of such
Debt Securities held by a person who is not a U.S. person (as defined in the
Prospectus Supplement, as applicable) in respect of specified taxes,
assessments or other governmental charges and whether the Company has the
option to redeem the affected Debt Securities rather than pay such Additional
Amounts; (11) whether such Debt Securities are to be issued in global form;
(12) the title of the Debt Securities and the series of which such Debt
Securities shall be a part; and (13) the denominations of such Debt
Securities. Reference is made to
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the Prospectus Supplement for the terms of the Debt Securities being offered
thereby, including whether such Debt Securities are Senior Debt Securities or
Subordinated Debt Securities. The Company may elect to deliver to purchasers
of Securities a Terms Sheet instead of a Prospectus. This Prospectus may be
delivered prior to or concurrently with a Terms Sheet. Debt Securities may
also be issued under the Indentures upon the exercise of Debt Warrants. See
"Description of Debt Warrants". Nothing in the Indentures or in the terms of
the Debt Securities will prohibit the issuance of securities representing
subordinated indebtedness that is senior or junior to the Subordinated Debt
Securities.
The Debt Securities will be issued, to the extent provided in the Prospectus
Supplement, in fully registered form without coupons, and/or in bearer form
with or without coupons, and in denominations set forth in the Prospectus
Supplement. No service charge will be made for any registration of transfer of
registered Debt Securities or exchange of Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charges that may be imposed in connection therewith. Each Indenture provides
that Debt Securities issued thereunder may be issued in global form. If any
series of Debt Securities is issuable in global form, the applicable
Prospectus Supplement will describe the circumstances, if any, under which
beneficial owners of interest in any such global Debt Securities may exchange
such interests for Debt Securities of such series and of like tenor and
principal amount in any authorized form and denomination. Principal of, and
any premium, Additional Amounts and interest on, a global Debt Security will
be payable in the manner described in the applicable Prospectus Supplement.
The provisions of the Indentures described above provide the Company with
the ability, in addition to the ability to issue Debt Securities with terms
different from those of Debt Securities previously issued, to "reopen" a
previous issue of a series of Debt Securities and issue additional Debt
Securities of such series.
The Senior Debt Securities will be unsecured and will rank pari passu with
all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities will be unsecured and will be subordinated to all
existing and future Senior Indebtedness (as defined below) of the Company.
Since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of the Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is necessarily
subject to the prior claims of creditors of the subsidiary, except to the
extent that claims of the Company itself as a creditor of the subsidiary may
be recognized. In addition, dividends, loans and advances from certain
subsidiaries, including MLPF&S, to the Company are restricted by net capital
requirements under the Securities Exchange Act of 1934 and under rules of
certain exchanges and other regulatory bodies.
Principal and any interest, premium and Additional Amounts will be payable
in the manner, at the places and subject to the restrictions set forth in the
applicable Indenture, the Debt Securities and the Prospectus Supplement
relating thereto, provided that payment of any interest and any Additional
Amounts may be made at the option of the Company by check mailed to the
holders of registered Debt Securities at their registered addresses.
Debt Securities may be presented for exchange, and registered Debt
Securities may be presented for transfer, in the manner, at the places and
subject to the restrictions set forth in the applicable Indenture, the Debt
Securities and the Prospectus Supplement relating thereto. Debt Securities in
bearer form and the coupons, if any, pertaining thereto will be transferable
by delivery. No service charge will be made for any transfer or exchange of
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other corporation, and
the Company may sell, lease or convey all or substantially all of its assets
to any corporation, provided that (i) the corporation (if other than the
Company) formed by or resulting from any such consolidation or merger or which
shall have received such assets shall be a corporation organized and existing
under the laws of the United States of America or a state thereof and shall
assume payment of the principal of, and any premium, Additional Amounts or
interest on, the Debt Securities and the performance and observance of all of
the covenants and
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conditions of the Indentures to be performed or observed by the Company, and
(ii) the Company or such successor corporation, as the case may be, shall not
immediately thereafter be in default under the Indentures.
MODIFICATION AND WAIVER
Modification and amendment of each Indenture may be effected by the Company
and the applicable Trustee with the consent of the Holders of at least 66 2/3%
in principal amount of the Outstanding Debt Securities of each series issued
pursuant to such Indenture and affected thereby, provided that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity of,
or any installment of interest or Additional Amounts on, any Debt Security or
any premium payable on the redemption thereof, or change the Redemption Price;
(b) reduce the principal amount of, or the interest or Additional Amounts
payable on, any Debt Security or reduce the amount of principal which could be
declared due and payable prior to the Stated Maturity; (c) change the place or
currency of any payment of principal of, or any premium, interest or Additional
Amounts on, any Debt Security; (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security; (e) reduce
the percentage in principal amount of the Outstanding Debt Securities of any
series, the consent of whose Holders is required to modify or amend such
Indenture; or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Debt Securities necessary to waive any past default to less than a
majority. No modification or amendment of the Subordinated Indenture or any
Subsequent Indenture for Subordinated Debt Securities may adversely affect the
rights of any Holder of Senior Indebtedness without the consent of such Holder.
Except with respect to certain fundamental provisions, the Holders of at least
a majority in principal amount of Outstanding Debt Securities of any series
may, with respect to such series, waive past defaults under the applicable
Indenture and waive compliance by the Company with certain provisions of such
Indenture.
EVENTS OF DEFAULT
Under each Indenture, the following will be Events of Default with respect to
Debt Securities of any series issued thereunder: (a) default in the payment of
any interest or Additional Amounts upon any Debt Security of that series when
due, and such default has continued for 30 days; (b) default in the payment of
any principal of or premium, if any, on any Debt Security of that series when
due; (c) default in the deposit of any sinking fund payment, when due, in
respect of any Debt Security of that series; (d) default in the performance of
any other covenant of the Company contained in such Indenture for the benefit
of such series or in the Debt Securities of such series, and such default has
continued for 60 days after written notice as provided in such Indenture; (e)
certain events in bankruptcy, insolvency or reorganization; and (f) any other
Event of Default provided with respect to Debt Securities of that series. The
applicable Trustee or the Holders of 25% in principal amount of the Outstanding
Debt Securities of that series may declare the principal amount (or such lesser
amount as may be provided for in the Debt Securities of that series) of all
Outstanding Debt Securities of that series and the interest accrued thereon and
Additional Amounts payable in respect thereof, if any, to be due and payable
immediately if an Event of Default with respect to Debt Securities of such
series shall occur and be continuing at the time of declaration. At any time
after a declaration of acceleration has been made with respect to Debt
Securities of any series but before a judgment or decree for payment of money
due has been obtained by the applicable Trustee, the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series may rescind
any declaration of acceleration and its consequences, provided that all
payments due (other than those due as a result of acceleration) have been made
and all Events of Default have been remedied or waived. Any Event of Default
with respect to Debt Securities of any series may be waived by the Holders of a
majority in principal amount of all Outstanding Debt Securities of that series,
except in a case of failure to pay principal of or premium, if any, or interest
or Additional Amounts, if any, on any Debt Security of that series for which
payment had not been subsequently made or in respect of a covenant or provision
which cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security of such series affected.
The Holders of a majority in principal amount of the Outstanding Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the applicable Trustee or exercising any
trust or power conferred on such Trustee with respect to Debt Securities of
such series, provided that such direction shall not be in conflict with any
rule of law or the applicable Indenture. Subject
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to the provisions of each Indenture relating to the duties of the appropriate
Trustee, before proceeding to exercise any right or power under an Indenture at
the direction of such Holders, the applicable Trustee shall be entitled to
receive from such Holders reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in complying with any
such direction.
The Company will be required to furnish to each Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
applicable Indenture.
SPECIAL TERMS RELATING TO THE SENIOR DEBT SECURITIES
LIMITATIONS UPON LIENS
The Senior Indentures provide that the Company may not, and may not permit
any Subsidiary to, create, assume, incur or permit to exist any indebtedness
for borrowed money secured by a pledge, lien or other encumbrance (except for
certain liens specifically permitted by the Senior Indentures) on the Voting
Stock owned directly or indirectly by the Company of any Subsidiary (other than
a Subsidiary which, at the time of incurrence of such secured indebtedness, has
a net worth of less than $3,000,000) without making effective provision whereby
the Outstanding Senior Debt Securities will be secured equally and ratably with
such secured indebtedness.
LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Senior Indentures provide that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue, sell
or otherwise dispose of any of its Voting Stock, unless, after giving effect to
any such transaction, MLPF&S remains a Controlled Subsidiary (defined in the
Senior Indentures to mean a corporation more than 80% of the outstanding shares
of Voting Stock of which are owned directly or indirectly by the Company). In
addition, the Senior Indentures provide that the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary, or (ii) convey or transfer its properties and assets substantially
as an entirety, except to one or more Controlled Subsidiaries.
SPECIAL TERMS RELATING TO THE SUBORDINATED DEBT SECURITIES
Upon any distribution of assets of the Company resulting from any
dissolution, winding up, liquidation or reorganization, payments on
Subordinated Debt Securities are to be subordinated to the extent provided in
the Subordinated Indenture in right of payment to the prior payment in full of
all Senior Indebtedness, but the obligation of the Company to make payments on
the Subordinated Debt Securities will not otherwise be affected. No payment on
Subordinated Debt Securities may be made at any time when there is a default in
the payment of any principal, premium, interest, Additional Amounts, if any, or
sinking fund of or on any Senior Indebtedness. Holders of Subordinated Debt
Securities will be subrogated to the rights of holders of Senior Indebtedness
to the extent of payments made on Senior Indebtedness upon any distribution of
assets in any such proceedings out of the distributive shares of Subordinated
Debt Securities. By reason of such subordination, in the event of a
distribution of assets upon insolvency, certain creditors of the Company may
recover more, ratably, than Holders of Subordinated Debt Securities.
Senior Indebtedness is defined in the Subordinated Indenture as the principal
of, premium, if any, and unpaid interest on (a) indebtedness of the Company
(including indebtedness of others guaranteed by the Company), other than the
Subordinated Debt Securities, whether outstanding on the date of execution of
the Subordinated Indenture or thereafter created, incurred, assumed or
guaranteed, (i) for money owing to banks, (ii) for money borrowed from sources
other than banks or (iii) in connection with the acquisition by the Company or
a subsidiary of assets of any kind except in the ordinary course of business,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such indebtedness is not superior
in right of payment to the Subordinated Debt Securities, and (b) renewals,
extensions, modifications and refundings of any such indebtedness. As of June
30, 1995, a total of approximately $31.7 billion of the Company's indebtedness
would have been Senior Indebtedness as so defined.
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DESCRIPTION OF DEBT WARRANTS
The Company may issue, together with Debt Securities, Currency Warrants or
Index Warrants or separately, Debt Warrants for the purchase of Debt
Securities. The Debt Warrants are to be issued under debt warrant agreements
(each a "Debt Warrant Agreement") to be entered into between the Company and a
bank or trust company, as debt warrant agent (the "Debt Warrant Agent"), all as
shall be set forth in the Prospectus Supplement relating to Debt Warrants being
offered thereby. A copy of the form of Debt Warrant Agreement, including the
form of warrant certificates representing the Debt Warrants (the "Debt Warrant
Certificates"), reflecting the alternative provisions to be included in the
Debt Warrant Agreements that will be entered into with respect to particular
offerings of Debt Warrants, is filed as an exhibit to the Registration
Statement. The following summaries of certain provisions of the Debt Warrant
Agreement and the Debt Warrant Certificates do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all the
provisions of the Debt Warrant Agreement and the Debt Warrant Certificates,
respectively, including the definitions therein of certain terms.
GENERAL
The applicable Prospectus Supplement will describe the terms of Debt Warrants
offered thereby, the Debt Warrant Agreement relating to such Debt Warrants and
the Debt Warrant Certificates representing such Debt Warrants, including the
following: (1) the designation, aggregate principal amount, price at which such
principal amount may be purchased upon exercise and terms of the Debt
Securities purchasable upon exercise of such Debt Warrants, including whether
such Debt Securities are Senior Debt Securities or Subordinated Debt
Securities, and the procedures and conditions relating to the exercise of such
Debt Warrants; (2) the designation and terms of any related Debt Securities
with which such Debt Warrants are issued, including whether such Debt
Securities are Senior Debt Securities or Subordinated Debt Securities, the
number of such Debt Warrants issued with each such Debt Security, and the
Indenture under which the Debt Securities will be issued; (3) the date, if any,
on and after which such Debt Warrants and the related Debt Securities will be
separately transferable; (4) the date on which the right to exercise such Debt
Warrants shall commence and the date on which such right shall expire (the
"Expiration Date"); (5) if the Debt Securities purchasable upon exercise of
such Debt Warrants are original issue discount Debt Securities, a discussion of
Federal income tax considerations applicable thereto; and (6) whether the Debt
Warrants represented by the Debt Warrant Certificates will be issued in
registered or bearer form, and, if registered, where they may be transferred
and registered.
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations and Debt Warrants may be exercised at
the corporate trust office of the Debt Warrant Agent or any other office
indicated in the Prospectus Supplement. Prior to the exercise of their Debt
Warrants, holders of Debt Warrants will not have any of the rights of Holders
of the Debt Securities purchasable upon such exercise and will not be entitled
to payments of principal of, and any premium, Additional Amounts, if any, or
interest on, the Debt Securities purchasable upon such exercise.
EXERCISE OF DEBT WARRANTS
Each Debt Warrant will entitle the Holder to purchase for cash such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth in, or be determinable as set forth in, the Prospectus Supplement
relating to the Debt Warrants offered thereby. Debt Warrants may be exercised
at any time up to the close of business on the Expiration Date set forth in the
Prospectus Supplement relating to the Debt Warrants offered thereby. After the
close of business on the Expiration Date, unexercised Debt Warrants will become
void.
Debt Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Debt Warrants offered thereby. Upon receipt of payment and the
Debt Warrant Certificate properly completed and duly executed at the corporate
trust office of the Debt Warrant Agent or any other office indicated in the
Prospectus Supplement, the Company will, as soon as practicable, forward the
Debt Securities purchasable
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upon such exercise. If less than all of the Debt Warrants represented by such
Debt Warrant Certificate are exercised, a new Debt Warrant Certificate will be
issued for the remaining amount of Debt Warrants.
DESCRIPTION OF CURRENCY WARRANTS
The Company may issue, together with Debt Securities, Debt Warrants or Index
Warrants or separately, Currency Warrants either in the form of Currency Put
Warrants entitling the Holders thereof to receive from the Company the cash
settlement value in U.S. dollars of the right to sell a specified amount of a
specified foreign currency or currency units for a specified amount of U.S.
dollars, or in the form of Currency Call Warrants entitling the Holders thereof
to receive from the Company the cash settlement value in U.S. dollars of the
right to purchase a specified amount of a specified foreign currency or units
of two or more currencies for a specified amount of U.S. dollars. The Currency
Warrants are to be issued under a currency put warrant agreement or a currency
call warrant agreement, as applicable (each a "Currency Warrant Agreement"), to
be entered into between the Company and a bank or trust company, as currency
warrant agent (the "Currency Warrant Agent"), all as shall be set forth in the
applicable Prospectus Supplement. Copies of the forms of Currency Put Warrant
Agreement and Currency Call Warrant Agreement, including the forms of warrant
certificates representing the Currency Put Warrants and Currency Call Warrants
(the "Currency Warrant Certificates"), reflecting the provisions to be included
in the Currency Warrant Agreements that will be entered into with respect to
particular offerings of Currency Warrants, are filed as exhibits to the
Registration Statement. The following summaries of certain provisions of the
Currency Warrant Agreements and the Currency Warrant Certificates do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Currency Warrant Agreements and the
Currency Warrant Certificates, respectively, including the definitions therein
of certain terms.
GENERAL
The applicable Prospectus Supplement will describe the terms of Currency
Warrants offered thereby, the Currency Warrant Agreement relating to such
Currency Warrants and the Currency Warrant Certificates representing such
Currency Warrants, including the following: (1) whether such Currency Warrants
shall be Currency Put Warrants, Currency Call Warrants, or both; (2) the
formula for determining the cash settlement value of each Currency Warrant; (3)
the procedures and conditions relating to the exercise of such Currency
Warrants; (4) the circumstances which will cause the Currency Warrants to be
deemed to be automatically exercised; (5) any minimum number of Currency
Warrants which must be exercised at any one time, other than upon automatic
exercise; and (6) the date on which the right to exercise such Currency
Warrants shall commence and the date on which such right shall expire (the
"Expiration Date"), provided that the commencement date and the Expiration Date
may be the same date.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Except as may otherwise be provided in an applicable Prospectus Supplement,
the Currency Warrants will be issued in the form of global Currency Warrant
Certificates, registered in the name of a depository or its nominee. Beneficial
owners will not be entitled to receive definitive certificates representing
Currency Warrants. Ownership of a Currency Warrant will be recorded on or
through the records of the brokerage firm or other entity that maintains a
beneficial owner's account. In turn, the total number of Currency Warrants held
by an individual brokerage firm for its clients will be maintained on the
records of the depository in the name of such brokerage firm or its agent.
Transfer of ownership of any Currency Warrant will be effected only through the
selling beneficial owner's brokerage firm.
EXERCISE OF CURRENCY WARRANTS
Each Currency Warrant will entitle the Holder to the cash settlement value of
such Currency Warrant on the applicable Exercise Date, in each case as such
terms will be defined in the applicable Prospectus Supplement. If a Currency
Warrant has more than one exercise date and is not exercised prior to 1:30
P.M., New York City time, on the fifth New York Business Day preceding the
Expiration Date, Currency Warrants will be deemed automatically exercised.
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LISTING
Each issue of Currency Warrants will be listed on a national securities
exchange, subject only to official notice of issuance, as a condition of sale
of any such Currency Warrants. In the event that the Currency Warrants are
delisted from, or permanently suspended from trading on, such exchange, the
Expiration Date for such Currency Warrants will be the date such delisting or
trading suspension becomes effective and Currency Warrants not previously
exercised will be deemed automatically exercised on the business day
immediately preceding such Expiration Date. The applicable Currency Warrant
Agreement will contain a covenant of the Company not to seek delisting of the
Currency Warrants, or suspension of their trading, on such exchange.
DESCRIPTION OF INDEX WARRANTS
The Company may issue from time to time Index Warrants consisting of put
warrants (the "Index Put Warrants") or call warrants (the "Index Call
Warrants"). The Index Warrants will entitle the holders to receive from the
Company a payment or delivery, subject to applicable law, determined by
reference to decreases (in the case of Index Put Warrants) or to increases (in
the case of Index Call Warrants) in the level of an index or portfolio based on
one or more equity or debt securities (including the price or yield of such
securities), any statistical measure of economic or financial performance
(including any consumer price, currency or mortgage index) or the price or
value of any commodity or any combination thereof (the "Index"). Unless
otherwise specified in the accompanying Prospectus Supplement, payments, if
any, upon exercise (or deemed exercise) of the Index Warrants will be made in
U.S. dollars. The Index Warrants will be offered on terms to be determined at
the time of sale.
GENERAL
The applicable Prospectus Supplement will describe the Index Warrant
Agreement or Index Warrant Trust Indenture (each as defined below), as the case
may be, relating to the Index Warrants being offered thereby and the terms of
such Index Warrants, including, without limitation: (i) whether the Index
Warrants to be issued will be Index Put Warrants, Index Call Warrants or both;
(ii) the aggregate number and initial public offering price or purchase price;
(iii) the Index for such Index Warrants; (iv) whether the Index Warrants will
be deemed exercised as of a specified date or whether the Index Warrants may be
exercised during a period and the date on which the right to exercise such
Index Warrants commences and the date on which such right expires; (v) the
manner in which such Index Warrants may be exercised and any restrictions on,
or other special provisions relating to, the exercise of such Index Warrants;
(vi) the minimum number, if any, of such Index Warrants exercisable at any one
time; (vii) the maximum number, if any, of such Index Warrants that may,
subject to the Company's election, be exercised by all Index Warrantholders (or
by any person or entity) on any day; (viii) any provisions permitting an Index
Warrantholder to condition an exercise notice on the absence of certain
specified changes in the level of the applicable Index after the exercise date,
any provisions permitting the Company to suspend exercise of such Index
Warrants based on market conditions or other circumstances and any other
special provision relating to the exercise of such Index Warrants; (ix) any
provisions for the automatic exercise of such Index Warrants other than at
expiration; (x) any provisions permitting the Company to cancel such Index
Warrants upon the occurrence of certain events; (xi) any additional
circumstances which would constitute an Event of Default with respect to such
Index Warrants; (xii) the method of determining (a) the payment or delivery, if
any, to be made in connection with the exercise or deemed exercise of such
Index Warrants (the "Settlement Value"), (b) the minimum payment or delivery,
if any, to be made upon expiration of such Index Warrants (the "Minimum
Expiration Value"), (c) the payment or delivery to be made upon the exercise of
any right which the Company may have to cancel such Index Warrants and (d) the
value of the Index; (xiii) in the case of Index Warrants relating to an Index
for which the trading prices of underlying securities, commodities or rates are
expressed in a foreign currency, the method of converting amounts in the
relevant foreign currency or currencies into U.S. dollars (or such other
currency or composite currency in which the Index Warrants are payable); (xiv)
the method of providing for a substitute index or otherwise determining the
payment or delivery, if any, to be made in
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connection with the exercise of such Index Warrants if the Index changes or
ceases to be made available by its publisher; (xv) the time or times at which
payment or delivery, if any, will be made in respect of such Index Warrants
following exercise or deemed exercise; (xvi) the self-regulatory organization
on which such Index Warrants will be traded, if any; (xvii) any provisions for
issuing such Index Warrants in other than book-entry form; (xviii) if such
Index Warrants are not issued in book-entry form, the place or places at which
payment or delivery on cancellation, if any, and the Minimum Expiration Value,
if any, of such Index Warrants is to be made by the Company; (xix) certain U.S.
federal income tax consequences relating to such Index Warrants; and (xx) other
specific provisions.
Except as otherwise provided in the applicable Prospectus Supplement, each
issue of Index Warrants will contain the terms set forth below.
The Index Warrants which are issued without a Minimum Expiration Value will
be issued under one or more index warrant agreements (each, an "Index Warrant
Agreement") to be entered into between the Company and a bank or trust company,
as warrant agent (the "Index Warrant Agent"), all as described in the
Prospectus Supplement relating to such Index Warrants. The Index Warrant Agent
will act solely as the agent of the Company under the applicable Index Warrant
Agreement and will not assume any obligation or relationship of agency or trust
for or with any Index Warrantholders. A single bank or trust company may act as
Index Warrant Agent for more than one issue of Index Warrants.
The Index Warrants which are issued with a Minimum Expiration Value will be
issued under one or more index warrant trust indentures (each an "Index Warrant
Trust Indenture") to be entered into between the Company and a corporation (or
other person permitted to so act by the Trust Indenture Act of 1939, as amended
from time to time (the "Trust Indenture Act")), to act as trustee (the "Index
Warrant Trustee"), all as described in the Prospectus Supplement relative to
such Index Warrants. Any Index Warrant Trust Indenture will be qualified under
the Trust Indenture Act. To the extent allowed by the Trust Indenture Act, a
single qualified corporation may act as Index Warrant Trustee for more than one
issue of Index Warrants.
Forms of Index Warrant Agreement and Index Warrant Trust Indenture and the
respective global index warrant certificates related thereto are filed as
exhibits to the Registration Statement. The summaries herein of certain
provisions of the Index Warrant Agreement, the Index Warrant Trust Indenture
and global index warrant certificates do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Index Warrant Agreement, the Index Warrant Trust Indenture
and global index warrant certificates, respectively.
The Company will have the right to "reopen" a previous issue of Index
Warrants and to issue additional Index Warrants of such issue without the
consent of any Index Warrantholder.
The Index Warrants involve a high degree of risk, including the risk that the
Index Warrants will expire worthless except for the Minimum Expiration Value,
if any, of such Index Warrants. Investors should therefore be prepared to
sustain a total loss of the purchase price of the Index Warrants (except for
the Minimum Expiration Value, if applicable). Investors who consider purchasing
Index Warrants should be experienced with respect to options and option
transactions and reach an investment decision only after carefully considering
the suitability of the Index Warrants in light of their particular
circumstances and the information set forth below as well as additional
information contained in the Prospectus Supplement relating to such Index
Warrants.
Unless otherwise provided in the Prospectus Supplement, each Index Warrant
will entitle Index Warrantholders to receive from the Company upon exercise the
Settlement Value of such Index Warrant. Certain Index Warrants issued pursuant
to an Index Warrant Trust Indenture will, if specified in the Prospectus
Supplement, entitle the Index Warrantholder to receive from the Company, under
certain circumstances specified in the Prospectus Supplement, a payment or
delivery equal to the greater of the applicable Settlement Value and a Minimum
Expiration Value of such Index Warrants. In addition, certain Index Warrants
will, if specified in the Prospectus Supplement, entitle Index Warrantholders
to receive from the Company a certain payment or delivery upon cancellation of
the Index Warrants by the Company, upon
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the occurrence of specified events. In addition, if so specified in the
Prospectus Supplement, following the occurrence of an extraordinary event, the
Settlement Value of an Index Warrant may, at the option of the Company, be
determined on a different basis, including in connection with automatic
exercise at expiration.
Unless otherwise specified in the related Prospectus Supplement, the Index
Warrants will be deemed to be automatically exercised upon expiration or such
earlier date that may be specified. Upon such automatic exercise, Index
warrantholders will be entitled to receive a payment or delivery equal to the
Settlement Value of the Index Warrants, except that holders of Index Warrants
having a Minimum Expiration Value will be entitled to receive a payment or
delivery equal to the greater of such Settlement Value and the applicable
Minimum Expiration Value. The Minimum Expiration Value may be either a
predetermined payment or delivery or a payment or delivery that varies during
the term of the Index Warrants in accordance with a schedule or formula. Any
Minimum Expiration Value applicable to an issue of Index Warrants, as well as
any additional circumstances resulting in the automatic exercise of such Index
Warrants, will be specified in the related Prospectus Supplement.
If so specified in the Prospectus Supplement, the Index Warrants may be
canceled by the Company, or the exercise or valuation of, or payment or
delivery for, such Index Warrants may be delayed or postponed upon the
occurrence of an extraordinary event. Any extraordinary events relating to an
issue of Index Warrants will be set forth in the related Prospectus Supplement.
Upon cancellation, the related Index warrantholders will be entitled to receive
only the applicable payment or delivery on cancellation specified in such
Prospectus Supplement. The payment or delivery on cancellation may be either a
predetermined payment or delivery or a payment or delivery that varies during
the term of the Index Warrants in accordance with a schedule or formula.
If the Company defaults with respect to any of its obligations under Index
Warrants which are issued with a Minimum Expiration Value pursuant to an Index
Warrant Trust Indenture, such default may be waived by the Index warrantholders
of a majority in interest of all outstanding Index Warrants, except a default
in the payment or delivery of the Settlement Value, Minimum Expiration Value or
cancellation payment or delivery (if applicable) on such Index Warrants or in
respect of a covenant or provision of the applicable Index Warrant Trust
Indenture which cannot be modified or amended without the consent of the Index
warrantholder of each outstanding Index Warrant affected.
The Index Warrants are unsecured contractual obligations of the Company and
will rank pari passu with the Company's other unsecured contractual obligations
and with the Company's unsecured and unsubordinated debt. Since the Company is
a holding company, the right of the Company, and hence the right of creditors
of the Company (including the Holders of the Debt Securities), to participate
in any distribution of the assets of any subsidiary upon its liquidation or
reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of the Company
itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Securities
Exchange Act of 1934 and under rules of certain exchanges and other regulatory
bodies.
Certain special United States federal income tax considerations may be
applicable to instruments such as the Index Warrants. The related Prospectus
Supplement will describe such tax considerations. The summary of United States
Federal income tax considerations contained in the Prospectus Supplement will
be presented for informational purposes only, however, and will not be intended
as legal or tax advice to prospective purchasers. Prospective purchasers of
Index Warrants are urged to consult their own tax advisors prior to any
acquisition of Index Warrants.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Except as may otherwise be provided in an applicable Prospectus Supplement,
Index Warrants will be issued in book-entry form and represented by global
Index Warrants, registered in the name of a depository or its nominee. Except
as may otherwise be provided in an applicable Prospectus Supplement, Index
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Warrantholders will not be entitled to receive definitive certificates
representing Index Warrants, unless the depository is unwilling or unable to
continue as depository or the Company decides to have the Index Warrants
represented by definitive certificates. A beneficial owner's interest in an
Index Warrant represented by a global Index Warrant will be recorded on or
through the records of the brokerage firm or other entity that maintains such
beneficial owner's account. In turn, the total number of Index Warrants held by
an individual brokerage firm or other entity for its clients will be maintained
on the records of the depository in the name of such brokerage firm or other
entity or its agent.
LISTING
Unless otherwise indicated in the Prospectus Supplement, the Index Warrants
will be traded pursuant to the rules of a self-regulatory organization as
specified in the Prospectus Supplement. It is expected that such self-
regulatory organization will cease trading an issue of Index Warrants at the
close of business on the related expiration date of such Index Warrants.
MODIFICATION
Any Index Warrant Agreement or Index Warrant Trust Indenture and the terms of
the related Index Warrants may be amended by the Company and the Index Warrant
Agent or Index Warrant Trustee, as the case may be (which amendment shall take
the form of a supplemental index warrant agreement or supplemental index
warrant trust indenture (collectively referred to as "Supplemental
Agreements")), without the consent of the holders of any Index Warrants, for
the purpose of (i) curing any ambiguity, or of curing, correcting or
supplementing any defective or inconsistent provision contained therein, or of
making any other provisions with respect to matters or questions arising under
the Index Warrant Agreement or Index Warrant Trust Indenture, as the case may
be, which shall not be inconsistent with the provisions thereof or of the Index
Warrants, (ii) evidencing the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
contained in the Index Warrant Agreement or the Index Warrant Trust Indenture,
as the case may be, and the Index Warrants, (iii) appointing a successor
depository, (iv) evidencing and providing for the acceptance of appointment by
a successor Index Warrant Agent or Index Warrant Trustee with respect to the
Index Warrants, as the case may be, (v) adding to the covenants of the Company,
for the benefit of the Index Warrantholders or surrendering any right or power
conferred upon the Company under the Index Warrant Agreement or Index Warrant
Trust Indenture, as the case may be, (vi) issuing Index Warrants in definitive
form, or (vii) amending the Index Warrant Agreement or Index Warrant Trust
Indenture, as the case may be, in any manner which the Company may deem to be
necessary or desirable and which will not materially and adversely affect the
interests of the Index warrantholders.
The Company and the Index Warrant Agent may also amend any Index Warrant
Agreement or Index Warrant Trust Indenture, as the case may be, and the terms
of the related Index Warrants (which amendment shall take the form of a
Supplemental Agreement) with the consent of the Index warrantholders holding
not less than 66 2/3% in number of the then outstanding unexercised Index
Warrants affected by such amendment, for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of the Index
Warrant Agreement or Index Warrant Trust Indenture, as the case may be, or of
modifying in any manner the rights of the Index warrantholders; provided that
no such amendment that (i) changes the determination of the Settlement Value or
the payment or delivery to be made on cancellation, if any, or Minimum
Expiration Value, if any, of the Index Warrants (or any aspects of such
determination) so as to reduce the payment or delivery to be made upon exercise
or deemed exercise, (ii) shortens the period of time during which the Index
Warrants may be exercised, or otherwise materially and adversely affects the
exercise rights of the Index warrantholders or (iii) reduces the number of
outstanding Index Warrants, the consent of whose holders is required for
amendment of the Index Warrant Agreement, the Index Warrant Trust Indenture or
the terms of the related Index Warrants, may be made without the consent of
each Index warrantholder affected thereby.
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EVENTS OF DEFAULT
Certain events in bankruptcy, insolvency or reorganization of the Company
will constitute an Event of Default with respect to Index Warrants having a
Minimum Expiration Value which are issued under an Index Warrant Trust
Indenture. Upon the occurrence of an Event of Default, the holders of 25% of
unexercised Index Warrants may elect to receive a settlement payment or
delivery for such unexercised Index Warrants, which will immediately become due
to the Index warrantholders upon such election in an amount equal to the market
value of such Index Warrants (assuming the Company's ability to satisfy its
obligations under such Index Warrants as they would become due) as of the date
the Company is notified of the intended liquidation, as determined by a
nationally recognized securities broker-dealer unaffiliated with the Company
and mutually selected by the Company and the Index Warrant Trustee.
MERGER, CONSOLIDATION, SALE, LEASE OR OTHER DISPOSITIONS
The Company may consolidate or merge with or into any other corporation and
the Company may sell, lease or convey all or substantially all of its assets to
any corporation, provided that (i) the corporation (if other than the Company)
formed by or resulting from any such consolidation or merger or which shall
have received such assets shall be a corporation organized and existing under
the laws of the United States of America or a State thereof and shall assume
the Company's obligations in respect of the payment or delivery of the
Settlement Value (or any Minimum Expiration Value or cancellation payment or
delivery, if applicable) with respect to all the unexercised Index Warrants and
the performance and observance of all of the covenants and conditions of the
Index Warrant Agreement or Index Warrant Trust Indenture, as the case may be,
to be performed or observed by the Company, and (ii) the Company or such
successor corporation, as the case may be, shall not immediately be in default
under the Index Warrant Agreement or Index Warrant Trust Indenture, as the case
may be.
ENFORCEABILITY OF RIGHTS BY INDEX WARRANTHOLDERS
Any Index warrantholder may, without the consent of the related Index Warrant
Agent, enforce by appropriate legal action, in and for its own behalf, its
right to exercise, and receive payment or delivery for, its Index Warrants.
PLAN OF DISTRIBUTION
The Company may sell Securities (i) through MLPF&S as agent, (ii) to the
public through, or through underwriting syndicates managed by, one or more of
the firms named on the cover page of this Prospectus or (iii) directly to
purchasers. The Prospectus Supplement with respect to the Securities of a
particular series describes the terms of the offering of such Securities,
including the name of the agent or the name or names of any underwriters, the
public offering or purchase price, any discounts and commissions to be allowed
or paid to the agent or underwriters, all other items constituting underwriting
compensation, the discounts and commissions to be allowed or paid to dealers,
if any, and the exchanges, if any, on which the Securities will be listed. Only
the agents or underwriters so named in the Prospectus Supplement are agents or
underwriters in connection with the Securities offered thereby. Under certain
circumstances, the Company may repurchase Securities and reoffer them to the
public as set forth above. The Company may also arrange for repurchases and
resales of such Securities by dealers.
If so indicated in the Prospectus Supplement, the Company will authorize
underwriters to solicit offers by certain institutions to purchase Debt
Securities from the Company pursuant to delayed delivery contracts providing
for payment and delivery on the date stated in the Prospectus Supplement. Each
such contract will be for an amount not less than, and, unless the Company
otherwise agrees, the aggregate principal amount of Debt Securities sold
pursuant to such contracts shall not be more than, the respective amounts
stated in the Prospectus Supplement. Institutions with whom such contracts,
when authorized, may be made include
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commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions, but
shall in all cases be subject to the approval of the Company. Delayed delivery
contracts will not be subject to any conditions except that the purchase by an
institution of the Debt Securities covered thereby shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject.
The Company has agreed to indemnify the agent and the several underwriters
against certain civil liabilities, including liabilities under the Securities
Act of 1933 (the "Act"), or contribute to payments the agent or the
underwriters may be required to make in respect thereof.
The distribution of Securities will conform to the requirements set forth in
the applicable sections of Schedule E to the By-Laws of the National
Association of Securities Dealers, Inc.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K, and incorporated by
reference in this Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The information under the caption "Summary Financial Information" for
each of the five years in the period ended December 30, 1994 included in this
Prospectus and the Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual Report
to Stockholders of the Company and incorporated by reference herein, has been
derived from consolidated financial statements audited by Deloitte & Touche
LLP, as set forth in their reports incorporated by reference herein. Such
consolidated financial statements and related financial statement schedules,
such Summary Financial Information and Selected Financial Data appearing or
incorporated by reference in this Prospectus and the Registration Statement of
which this Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in any such Quarterly Report on
Form 10-Q and incorporated by reference herein, they did not audit and they do
not express an opinion on such interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Act for
any such report on unaudited interim financial information because any such
report is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the Act.
22
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
LOGO
MERRILL LYNCH & CO., INC.
STRYPES SM
PAYABLE WITH SHARES OF COMMON STOCK OR OTHER SECURITIES
OF THE UNDERLYING ISSUER
(OR CASH WITH AN EQUAL VALUE)
-----------
Merrill Lynch & Co., Inc. (the "Company") intends to sell from time to time
its Structured Yield Product Exchangeable for Stock SM, STRYPES SM. The STRYPES
will be offered to the public in series and on terms determined by market
conditions at the time of sale and set forth in the accompanying prospectus
supplement (the "Prospectus Supplement"). The STRYPES will be unsecured
obligations of the Company ranking pari passu with all of its other unsecured
and unsubordinated indebtedness. See "Description of the STRYPES--Ranking."
On the maturity date of each series of STRYPES (the "Maturity Date"), the
Company will pay and discharge such STRYPES by delivering to the holder thereof
a number of shares of common stock or other securities (the "Underlying
Securities") of the unaffiliated corporation identified in the Prospectus
Supplement (the "Underlying Issuer") determined in accordance with a payment
rate formula specified in the Prospectus Supplement (or, at the Company's
option, which may be exercised with respect to all, but not less than all,
STRYPES of such series, cash with an equal value). THERE CAN BE NO ASSURANCE
THAT THE VALUE OF THE UNDERLYING SECURITIES (OR CASH) PAYABLE TO HOLDERS OF A
SERIES OF STRYPES ON THE MATURITY DATE WILL BE EQUAL TO OR GREATER THAN THE
ISSUE PRICE OF SUCH STRYPES. IF THE VALUE OF THE UNDERLYING SECURITIES (OR
CASH) RECEIVED ON THE MATURITY DATE OF A SERIES OF STRYPES IS LESS THAN THE
ISSUE PRICE PAID FOR SUCH STRYPES, AN INVESTMENT IN STRYPES WILL RESULT IN A
LOSS. SEE "DESCRIPTION OF THE STRYPES."
Each series of STRYPES may vary, where applicable, as to aggregate issue
price, Maturity Date, Underlying Issuer, Underlying Securities deliverable upon
maturity, formula or other method by which the amount of such Underlying
Securities will be determined, public offering or purchase price, interest rate
or rates, if any, and timing of payments thereof, provision for redemption,
currencies of denomination or currencies otherwise applicable thereto and any
other variable terms and method of distribution. The accompanying Prospectus
Supplement sets forth the specific terms with regard to the series of STRYPES
in respect of which this Prospectus is being delivered.
Reference is made to any accompanying prospectus of the Underlying Issuer
covering the Underlying Securities which may be received by holders of a series
of STRYPES on the Maturity Date.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The STRYPES may be sold through Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"). STRYPES may not be sold without
delivery of a Prospectus Supplement describing such issue of STRYPES and the
method and terms of offering thereof, and any accompanying prospectus of the
Underlying Issuer covering the Underlying Securities which may be received by
holders of a series of STRYPES on the Maturity Date.
- -----
SM Service Mark of Merrill Lynch & Co., Inc.
-----------
The date of this Prospectus is , 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports, proxy and
information statements and other information concerning the Company may also be
inspected at the offices of the New York Stock Exchange, the American Stock
Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995 and
June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995, January
23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March 9, 1995,
April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21, 1995, August
1, 1995, and August 2, 1995 filed pursuant to Section 13 of the Exchange Act,
are hereby incorporated by reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of the STRYPES shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
(WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE)
OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T. RUSSO, SECRETARY,
MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR, NEW YORK, NEW YORK
10080-6512; TELEPHONE NUMBER (212) 602-8435.
----------------
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED THE OFFERING OF THE SECURITIES MADE HEREBY NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its subsidiaries
and affiliates, provides investment, financing, insurance, and related services
on a global basis. Its principal subsidiary, MLPF&S, one of the largest
securities firms in the world, is a leading broker in securities, options
contracts, and commodity and financial futures contracts; a leading dealer in
options and in corporate and municipal securities; a leading investment banking
firm that provides advice to, and raises capital for, its clients; and an
underwriter of selected insurance products. Other subsidiaries provide
financial services on a global basis similar to those of MLPF&S and are engaged
in such other activities as international banking, lending, and providing other
investment and financing services. Merrill Lynch International Incorporated,
through subsidiaries and affiliates, provides investment, financing, and
related services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by the
U.S. Government and by Federal agencies or instrumentalities. Merrill Lynch
Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and Merrill
Lynch Capital Markets PLC are the Company's primary derivative product dealers
and enter into interest rate and currency swaps and other derivative
transactions as intermediaries and as principals. Merrill Lynch Asset
Management, L.P., with its related affiliates, is one of the largest mutual
fund managers in the world and provides investment advisory services. The
Company's insurance underwriting operations consist of the underwriting of life
insurance and annuity products. Banking, trust, and mortgage lending operations
conducted through subsidiaries of the Company include issuing certificates of
deposit, offering money market deposit accounts, making secured loans, and
providing foreign exchange facilities and other related services.
The principal executive office of the Company is located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281; its telephone
number is (212) 449-1000.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the STRYPES for
general corporate purposes. Such uses may include the funding of investments
in, or extensions of credit to, its subsidiaries, the funding of assets held by
the Company or its subsidiaries, including securities inventories, customer
receivables and loans (including business loans, home equity loans, and loans
in connection with investment banking-related merger and acquisition
activities), and the refunding of maturing indebtedness. The precise amount and
timing of investments in, and extensions of credit to, its subsidiaries will
depend upon their funding requirements and the availability of other funds to
the Company and its subsidiaries. Pending such applications, the net proceeds
will be temporarily invested or applied to the reduction of short-term
indebtedness. Management of the Company expects that it will, on a recurrent
basis, engage in additional financings as the need arises to finance the growth
of the Company or to lengthen the average maturity of its borrowings. To the
extent that STRYPES being purchased for resale by MLPF&S are not resold, the
aggregate proceeds to the Company and its subsidiaries would be reduced.
3
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following summary of consolidated financial information was derived
from, and is qualified in its entirety by reference to, the financial
statements, condensed financial statements, and other information and data
contained in the Company's Annual Report on Form 10-K for the year ended
December 30, 1994 and Quarterly Report on Form 10-Q for the period ended June
30, 1995 (the "Quarterly Report"). See "Incorporation of Certain Documents by
Reference." The condensed consolidated financial statements contained in the
Quarterly Report are unaudited; however, in the opinion of management of the
Company, all adjustments (consisting only of normal recurring accruals)
necessary for a fair statement of the results of operations have been
included. The year-end results include 52 weeks for 1990, 1991, 1992, and 1994
and 53 weeks for 1993.
The Company conducts its business in highly volatile markets. Consequently,
the Company's results can be affected by many factors, including general
market conditions, the liquidity of secondary markets, the level and
volatility of interest rates and currency values, the valuation of securities
positions, competitive conditions, and the size, number, and timing of
transactions. In periods of unfavorable market activity, profitability can be
adversely affected because certain expenses remain relatively fixed. As a
result, net earnings and revenues can vary significantly from period to
period. Thus, interim results may not necessarily be representative of the
full year results of operations.
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN DECEMBER SIX MONTHS ENDED
---------------------------------------------------------------- -------------------------
JULY 1, JUNE 30,
1990 1991 1992 1993 1994 1994 1995
----------- ----------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
INFORMATION
(In thousands, except
ratios)
Revenues................ $11,147,229 $12,352,812 $ 13,412,668 $ 16,588,177 $ 18,233,091 $ 9,219,111 $ 10,788,871
Net revenues(1)......... $ 5,783,329 $ 7,246,468 $ 8,577,401 $ 10,558,230 $ 9,624,521 $ 5,229,547 $ 4,969,677
Earnings before income
taxes and cumulative
effect of changes in
accounting
principles(2).......... $ 282,328 $ 1,017,418 $ 1,621,389 $ 2,424,808 $ 1,729,604 $ 1,084,870 $ 843,092
Cumulative effect of
changes in accounting
principles (net of
applicable income
taxes)(2).............. -- -- $ (58,580) $ (35,420) -- -- --
Net earnings(2)......... $ 191,856 $ 696,117 $ 893,825 $ 1,358,939 $ 1,016,761 $ 623,568 $ 510,071
Ratio of earnings to
fixed charges(3)....... 1.1 1.2 1.3 1.4 1.2 1.3 1.1
BALANCE SHEET
INFORMATION(4)(5)
(In thousands)
Total assets............ $68,129,527 $86,259,343 $107,024,173 $152,910,362 $163,749,327 $174,006,536 $174,852,533
Long-term borrowings.... $ 6,341,559 $ 7,964,424 $ 10,871,100 $ 13,468,900 $ 14,863,383 $ 15,289,293 $ 15,703,594
Stockholders' equity.... $ 3,225,430 $ 3,818,088 $ 4,569,104 $ 5,485,913 $ 5,817,545 $ 5,628,394 $ 5,883,238
</TABLE>
- --------
(1) Net revenues are revenues net of interest expense.
(2) Net earnings for 1992 were reduced by $58,580,000 to reflect the adoption
of Statement of Financial Accounting Standards ("SFAS") No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," and
SFAS No. 109, "Accounting for Income Taxes." Net earnings for 1993 were
reduced by $35,420,000 to reflect the adoption of SFAS No. 112, "Employers'
Accounting for Postemployment Benefits."
(3) For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
(4) In 1994, the Company adopted Financial Accounting Standards Board ("FASB")
Interpretation No. 39, "Offsetting of Amounts Related to Certain Contracts,"
and FASB Interpretation No. 41, "Offsetting of Amounts Related to Certain
Repurchase and Reverse Repurchase Agreements," which increased assets and
liabilities at December 30, 1994 by approximately $8,500,000,000.
(5) To finance its diverse activities, the Company and certain of its
subsidiaries borrow substantial amounts of short-term funds on a regular
basis. Although the amount of short-term borrowings significantly varies
with the level of general business activity, on June 30, 1995,
$753,051,000 of bank loans and $14,975,863,000 of commercial paper were
outstanding. In addition, certain of the Company's subsidiaries lend
securities and enter into repurchase agreements to obtain financing. At
June 30, 1995, cash deposits for securities loaned and securities sold
under agreements to repurchase amounted to $3,614,152,000 and
$52,491,110,000, respectively. From July 1, 1995 to August 14, 1995, long-
term borrowings, net of new issuances and resales, decreased by
approximately $163,176,000.
4
<PAGE>
FISCAL YEAR 1994
Financial markets, strong from 1991 through the first six weeks of 1994,
changed significantly after inflationary fears prompted the Federal Reserve to
increase short-term interest rates in February 1994. As the U.S. economy
continued to expand, the Federal Reserve acted to further curb inflation and to
moderate growth by increasing short-term interest rates five additional times
during the year. The combination of rising interest rates, a falling U.S.
dollar, unsettled global stock, bond, and currency markets, reduced foreign
investment in U.S. financial markets, and overall investor caution contributed
to lower earnings for most U.S. securities firms. These conditions affected the
Company's 1994 fourth quarter and full year results. Net earnings for the 1994
fourth quarter were $161.6 million, down 30% from the 1994 third quarter and
down 53% from the 1993 fourth quarter.
Net earnings for 1994 were $1,016.8 million, down 25% from record 1993
earnings of $1,358.9 million. Net earnings for 1993 included a $35.4 million
cumulative effect charge (net of $25.1 million of applicable income tax
benefits) related to the adoption of Statement of Financial Accounting
Standards No. 112, "Employers' Accounting for Postemployment Benefits." Earnings
for 1993 before the cumulative effect of the change in accounting principle
were $1,394.4 million. Earnings per common share in 1994 were $4.75 primary and
$4.74 fully diluted, compared with $5.98 primary and $5.95 fully diluted ($6.14
primary and $6.11 fully diluted before the accounting change) in 1993. As
previously reported, 1993 results included a non-recurring pretax lease charge
totaling $103.0 million ($59.7 million after income taxes) related to the
Company's decision not to occupy certain space at the World Financial Center
Headquarters ("Headquarters") facility. This space was sublet in 1994.
Total revenues were $18,233 million, up 10% from 1993. Net revenues (revenues
after interest expense) totaled $9,625 million in 1994, down 9% from 1993.
Commission revenues were $2,871 million, virtually unchanged from $2,894
million in 1993. Higher commission revenues from mutual funds and commodity
transactions were offset by lower revenues from money market instruments,
particularly medium-term notes, and listed securities transactions. Sales of
mutual funds, particularly front-end funds, declined as investors were less
active due to uncertain markets and rising interest rates. For the first time
since 1974, both stock and bond funds fell in value industrywide, on average,
in the same year. Distribution fees from deferred charge funds benefited from
strong mutual fund sales in prior periods, while redemption fees increased as
investors repositioned their portfolios primarily from fixed-income funds to
stock and money market funds. Commissions on listed securities transactions
decreased due to a decline in the relative amount of business by retail clients
versus institutional clients. Other commission revenues declined principally as
a result of lower commissions from money market instruments, partially offset
by higher revenues from commodity transactions.
Interest and dividend revenues increased 35% to $9,578 million from $7,099
million in 1993. Interest expense, which includes dividend expense, rose 43% to
$8,609 million from $6,030 million in 1993. Net interest and dividend profit
decreased 9% to $969 million as a significant increase in short-term interest
rates, year over year, led to a substantial flattening of the yield curve. The
change in the yield curve, the relationship between interest rates and
maturities, resulted from short-term interest rates rising faster than long-
term interest rates in 1994. As a result, interest spreads declined, while
financing and hedging costs increased from 1993.
Principal transactions revenues fell 20% to $2,335 million from the 1993
record $2,920 million due to rising interest rates, a declining U.S. dollar,
and volatile world financial markets. Revenues from taxable fixed-income
securities, equities and equity derivatives, and foreign exchange and
commodities decreased, while interest rate and currency swaps, and municipal
securities revenues increased. Taxable fixed-income revenues declined 52% to
$462 million as higher interest rates, wider credit spreads, and uncertainty in
emerging markets led to reduced demand and lower inventory values. Equities and
equity derivatives trading revenues decreased 28% to $627 million, reflecting
lower trading results in virtually all categories, including a loss in
5
<PAGE>
convertible securities. Foreign exchange and commodities revenues, in the
aggregate, declined 31% to $109 million. Weakness in the U.S. dollar versus
other major currencies depressed foreign exchange trading, while commodities
trading revenues benefited from increased volume. Interest rate and currency
swaps revenues advanced 24% to $749 million reflecting higher revenues from
U.S. dollar-denominated swap trading activities, particularly those related to
structured financing transactions. Municipal securities trading revenues
increased 20% to $388 million due to strong retail investor demand for tax-
exempt investments.
Investment banking revenues were $1,239 million, down 32% from $1,831 million
in 1993 due primarily to the effects of rising interest rates and reduced
demand. Underwriting revenues declined in almost all categories, with
significant decreases in equities, corporate bonds and preferred stock, and
convertible securities. Strategic services revenues, which include fees for
debt restructuring, merger and acquisition activity, and other advisory
services, benefited from increased merger and acquisition advisory assignments
in various industries.
Asset management and portfolio services fees rose 12% from $1,558 million in
1993 to a record $1,739 million. Asset management fees advanced due primarily
to an increase in stock funds under management. Portfolio service fees advanced
due to the continued growth in the number of Asset Power (Registered Trademark)
accounts, a product with fees and transaction limits based on asset levels, and
increased revenues from the ML Consults (Registered Trademark) product.
Other revenues were $471 million, up 65% from $285 million in 1993. The
increase in other revenues was attributable to net realized investment gains
related to merchant banking activities of $81 million, compared with unrealized
losses of $133 million in 1993.
Non-interest expenses were $7,895 million, down 3% from $8,133 million in the
year-ago period. Excluding the 1993 non-recurring lease charge totaling $103.0
million, non-interest expenses declined 2%.
Compensation and benefits expense, which represented approximately 63% of
total non-interest expenses, declined 6% due principally to lower incentive and
production-related compensation. Compensation and benefits expense, as a
percentage of net revenues, was 51.5% in 1994, compared with 49.8% in 1993.
Occupancy costs declined 24% (7% excluding the 1993 non-recurring lease
charge) benefiting from continued relocation of support staff to lower-cost
facilities and reduced space requirements at the Headquarters facility. Other
facilities costs, which include communications and equipment rental, and
depreciation and amortization, were up 9% due to increased use of market data,
news, and statistical services and higher depreciation expense from the
acquisition of technology-related equipment.
Advertising and market development expenses were down 1% with discretionary
costs decreasing as business conditions became less favorable. Lower sales
promotion and a reduction in advertising campaigns were partially offset by
increased travel related to international business activities. Professional
fees increased 26% due primarily to the use of system and management
consultants to upgrade technology and processing capabilities in trading,
credit, and customer services, as well as higher legal fees. Brokerage,
clearing, and exchange fees increased 20% reflecting higher international
equity volume and expanded risk management activities related to volatile
global market conditions. Other expenses increased 1% from 1993, due to an
increase in office supplies and postage costs.
Income tax expense totaled $713 million in 1994, down 31% from $1,030 million
in 1993. The effective tax rate was 41.2% in 1994 versus 42.5% in 1993 as a
result of lower state income taxes.
The Company's Annual Report on Form 10-K for the year ended December 30, 1994
describes an action commenced against the Company by Orange County, California
(the "County") and the Orange County Investment Pools (the "Pools"). See
"Incorporation of Certain Documents by Reference." The County and
6
<PAGE>
the Pools seek relief in excess of $2 billion in connection with various
securities transactions between the County and/or the Pools and the Company and
its subsidiaries. Other actions have also been commenced against the Company
and its subsidiaries arising out of the Company's dealings with the County
Treasurer and the Pools.
The Company will vigorously contest these actions and believes it has
meritorious defenses. Although the ultimate outcome of these actions cannot be
ascertained at this time and the results of legal proceedings cannot be
predicted with certainty, it is the opinion of management that the resolution
of these actions will not have a material adverse effect on the consolidated
financial condition or results of operations of the Company for the year ended
December 30, 1994.
The Company has also received inquiries from various governmental entities
examining the underlying events and is cooperating with these inquiries.
CERTAIN BALANCE SHEET INFORMATION AS OF DECEMBER 30, 1994
On January 1, 1994, the Company adopted Financial Accounting Standards Board
Interpretation No. 39 ("Interpretation No. 39"), "Offsetting of Amounts Related
to Certain Contracts." Interpretation No. 39 affects the financial statement
presentation of balances related to swap, forward, and other similar exchange
or conditional type contracts, and unconditional type contracts. To offset
unconditional contracts, such as resale and repurchase agreements, net cash
settlement of the related receivable and payable balances is also required by
Interpretation No. 39, as modified by Interpretation No. 41, "Offsetting of
Amounts Related to Certain Repurchase and Reverse Repurchase Agreements." Prior
to the adoption of these Interpretations, the Company followed industry
practice in reporting balances related to certain types of contracts on a net
basis. Unrealized gains and losses for swap, forward, and other similar
contracts were reported net on the balance sheet by contract type, while
certain receivables and payables related to resale and repurchase agreements
were reported net by counterparty. The effect of these Interpretations
increased assets and liabilities at December 30, 1994 by approximately $8.5
billion.
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its market-making,
investment banking, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers and the
liquidity of the market for such securities, in addition to the usual risks
associated with investing in, extending credit, underwriting, and trading in
investment grade instruments.
At December 30, 1994, the fair value of long and short non-investment grade
trading inventories amounted to $3,309 million and $456 million, respectively,
and in the aggregate (i.e., the sum of long and short trading inventories)
represented 4.3% of aggregate consolidated trading inventories.
At December 30, 1994, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $257 million
(excluding unutilized revolving lines of credit and other lending commitments
of $50 million), consisting primarily of senior term and subordinated
financings to 35 medium-sized corporations. At December 30, 1994, the Company
had no bridge loans outstanding. Loans to highly leveraged corporations are
carried at unpaid principal balance less a reserve for estimated losses. The
allowance for loan losses is estimated based on a review of each loan, and
consideration of economic, market, and credit conditions. Direct equity
investments made in conjunction with the Company's investment and merchant
banking activities aggregated $289 million at December 30, 1994, representing
investments in 80 enterprises. Equity investments in privately-held
corporations for which sale is restricted by government or contractual
requirements are carried at the lower of cost or estimated net realizable
value. At December 30, 1994, the Company held interests in partnerships,
totaling $93 million (recorded on the cost basis), that invest
7
<PAGE>
in highly leveraged transactions and non-investment grade securities. Prior to
July 1, 1994, the Company had a co-investment arrangement to enter into direct
equity investments. At December 30, 1994, the Company also committed to invest
an additional $80 million in partnerships that invest in leveraged
transactions.
The Company's insurance subsidiaries hold non-investment grade securities. As
a percentage of total insurance investments, non-investment grade securities
were 5.5% at December 30, 1994. Non-investment grade securities of insurance
subsidiaries were classified as available-for-sale and were carried at fair
value at December 30, 1994.
At December 30, 1994, the largest non-investment grade concentration
consisted of various issues of a South American sovereign totaling $235
million, of which $60 million represented on-balance-sheet hedges for off-
balance-sheet instruments. No one industry sector accounted for more than 21%
of total non-investment grade positions. At December 30, 1994, the Company held
an aggregate carrying value of $292 million in debt and equity securities of
issuers in various stages of bankruptcy proceedings. Approximately 71% of this
amount resulted from the Company's market-making activities in such securities.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1995
Financial markets, which were particularly weak during the last half of 1994,
improved during the first six months of 1995 as a result of a steadying U.S.
economy, declining interest rates, and heightened investor activity. Net
earnings were $227 million in the first quarter of 1995 and $283 million in the
second quarter, or $510 million for the 1995 first-half. Six-month 1995 net
earnings, however, were down 18% from the $624 million reported in the
comparable 1994 period, which included record first quarter net earnings of
$372 million. Total revenues for the first six months of 1995 were $10,789
million, up 17% over the 1994 first-half. Net revenues in the first six months
of 1995 were $4,970 million, down 5% from the comparable 1994 period due
primarily to lower investment banking and commission revenues. Non-interest
expenses were $4,127 million, virtually unchanged from the comparable 1994
period.
Commission revenues were $1,450 million for the first half of 1995, down 7%
from the 1994 first-half, primarily as a result of lower mutual fund revenues.
Mutual fund commissions were affected by lower volumes after the 1994 first
quarter as most stock and bond mutual funds declined in value. Sales of mutual
funds, however, increased during the 1995 second quarter as investors were more
active due to strong performances in both stock and bond markets.
Interest and dividend revenues were $6,325 million for the first half of
1995, up 40% from the comparable 1994 period. Interest expense, which includes
dividend expense, increased 46% from the first half of 1994 to $5,819 million.
Net interest profit declined 4% to $506 million primarily due to a more
significant increase in interest-bearing liabilities relative to the increase
in interest-earning assets during the period, as well as the continued
flattening of the yield curve.
Principal transactions revenues increased 5% from the first half of 1994 to
$1,289 million. Taxable fixed-income trading revenues increased due, in part,
to higher revenues from corporate bonds and preferred stock, high-yield bonds,
and non-U.S. government and agencies securities. Trading results in mortgage-
backed products were negatively affected by reduced market liquidity after the
1994 first quarter and fluctuations in interest rates, leading to a loss. Net
trading results from mortgage-backed products were positive, however, when
combined with related net interest income. Trading revenues in U.S. Government
and agencies securities were down from record 1994 levels as lower interest
rates in the current period reduced volatility. Revenues from interest rate and
currency swaps increased due to slightly higher volumes in non-U.S. dollar and
U.S. dollar denominated transactions. Municipal securities revenues were down
from record 1994 levels as declining interest rates and discussions of possible
tax law changes decreased investor demand. Equities and equity derivatives
trading revenues were virtually unchanged, while foreign exchange and
commodities trading revenues decreased due primarily to lower commodity trading
volume.
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Investment banking revenues were $584 million, down 24% from the first half
of 1994, as domestic and global industrywide underwriting volume declined 24%
and 22%, respectively, compared to volumes in the 1994 first-half. Although
down for the 1995 six-month period, second quarter 1995 industrywide domestic
underwriting volume increased 30% from the 1995 first quarter and 16% from the
1994 second quarter as a result of declining interest rates and stronger stock
and bond markets. Lower underwriting revenues were reported in equities and
high-yield securities, partially offset by higher revenues from corporate debt
and preferred stock issuances, particularly in the 1995 second quarter.
Strategic services revenues, which include merger and acquisition fees and
advisory fees, benefited from increased merger and acquisition advisory
assignments in various industries.
Asset management and portfolio service fees rose 4% from the 1994 first-half
to $913 million, principally as a result of increased fees earned from mutual
fund investor services and asset management activities. Other revenues
decreased 17% from the 1994 first-half to $228 million, due primarily to
realized investment gains in the 1994 period, compared with break-even results
on sales of investments in the 1995 six-month period.
Non-interest expenses were $4,127 million, virtually unchanged from the 1994
first-half. Compensation and benefits expense, which represented approximately
62% of non-interest expenses, decreased 3% from the 1994 first-half due
primarily to lower levels of variable incentive and production-related
compensation. Compensation and benefits expense as a percentage of net revenues
was 51.9% in the first half of 1995, compared with 50.6% in the year-ago
period.
Occupancy costs were virtually unchanged from the 1994 first-half. Other
facilities-related costs, which include communications and equipment rental
expense and depreciation and amortization expense, rose 10% primarily due to
increased usage of market information services, as well as higher depreciation
expense from the purchase of technology-related assets over the past year.
Advertising and market development expenses decreased 8% from the 1994 first-
half primarily due to lower travel and recognition program costs. Professional
fees increased 13% from the year ago period as higher legal fees were partially
offset by lower systems consulting fees. Brokerage, clearing, and exchange fees
increased 2% from the 1994 first-half as a result of higher volumes,
particularly in international markets. Other expenses increased 1% from the
1994 first-half and included a $26 million charge for the write-off of assets
related to a technology contract in the 1995 first quarter.
Income tax expense totaled $333 million for the first half of 1995. The
effective tax rate for the first six months of 1995 was 39.5%, compared with
42.5% in the year-ago period. The decrease in the effective tax rate was
primarily attributable to lower state income taxes, higher tax-exempt interest,
increased deductions for dividends received, and expanded international
business activities.
On July 21, 1995, the Company and Smith New Court PLC ("Smith New Court"), a
U.K.-based global securities firm, announced the terms of a cash offer under
which the Company expects to acquire Smith New Court. In the proposed
transaction, a wholly-owned subsidiary of the Company has offered to acquire
all outstanding capital shares of Smith New Court for cash, with the aggregate
offer valued at approximately $842 million. The transaction is conditioned on,
among other things, the receipt of all required regulatory approvals and is
expected to be completed late in the third quarter or early in the fourth
quarter of 1995.
CERTAIN BALANCE SHEET INFORMATION AS OF JUNE 30, 1995
The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.
In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market-making, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers of, and the
liquidity of the market for, such securities, in addition to the usual risks
associated with investing in, financing, underwriting, and trading in
investment grade instruments.
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At June 30, 1995, the fair value of long and short non-investment grade
trading inventories amounted to $4,036 million and $455 million, respectively,
and in the aggregate (i.e. the sum of long and short trading inventories),
represented 4.8% of aggregate consolidated trading inventories.
At June 30, 1995, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $246 million
(excluding unutilized revolving lines of credit and other lending commitments
of $96 million), consisting primarily of senior term and subordinated
financings to 37 medium-sized corporations. At June 30, 1995, the Company had
no bridge loans outstanding. Loans to highly leveraged corporations are carried
at unpaid principal balances less a reserve for estimated losses. The allowance
for loan losses is estimated based on a review of each loan, and consideration
of economic, market, and credit conditions. Direct equity investments made in
conjunction with the Company's investment and merchant banking activities
aggregated $238 million at June 30, 1995, representing investments in 72
enterprises. Equity investments in privately-held companies for which sale is
restricted by government or contractual requirements are carried at the lower
of cost or estimated net realizable value. At June 30, 1995, the Company held
interests in partnerships, totaling $102 million (recorded on the cost basis),
that invest in highly leveraged transactions and non-investment grade
securities. At June 30, 1995, the Company also committed to invest an
additional $87 million in partnerships that invest in leveraged transactions.
The Company's insurance subsidiaries hold non-investment grade securities. As
a percentage of total insurance investments, non-investment grade securities
were 4.8% at June 30, 1995. Non-investment grade securities of insurance
subsidiaries are classified as available-for-sale and are carried at fair
value.
At June 30, 1995, the largest non-investment grade concentration consisted of
government and corporate obligations of a Latin American sovereign totaling
$267 million, of which $47 million represented on-balance-sheet hedges for off-
balance-sheet financial instruments. No one industry sector accounted for more
than 19% of total non-investment grade positions. At June 30, 1995, the Company
held an aggregate carrying value of $344 million in debt and equity securities
of issuers in various stages of bankruptcy proceedings or in default, of which
88% of this amount resulted from the Company's market-making activities in such
securities.
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DESCRIPTION OF THE STRYPES
Each issue of STRYPES will be a series of Senior Debt Securities to be issued
under an indenture, dated as of April 1, 1983 and restated as of April 1, 1987
(as amended and supplemented from time to time, the "Principal Indenture"),
between the Company and Chemical Bank (successor by merger to Manufacturers
Hanover Trust Company), as trustee (the "Trustee"), as further amended and
supplemented by a supplemental indenture to be entered into by the Company and
the Trustee relating to each series of STRYPES (the "Supplemental Indenture")
(the Principal Indenture, as so amended and supplemented by the Supplemental
Indenture with respect to each series of STRYPES, the "Indenture"). The
following summary of certain provisions of the Indenture does not purport to be
complete and is qualified in its entirety by reference to the Indenture. All
capitalized terms not otherwise defined herein have the meanings specified in
the Indenture. Whenever particular Sections or defined terms of the Indenture
are referred to herein, such Sections or defined terms are incorporated by
reference herein.
GENERAL
The Supplemental Indenture will provide that STRYPES of the related series
may be issued from time to time under the Indenture, up to a specified
aggregate issue price, upon satisfaction of certain conditions precedent. The
Supplemental Indenture will establish the terms of the related series of
STRYPES, including: (1) the issue price per STRYPES; (2) the date on which such
STRYPES will mature; (3) the consideration deliverable or payable with respect
to such STRYPES, whether at maturity or upon earlier acceleration, and the
formula or other method by which the amount of such consideration will be
determined; (4) the rate or rates per annum (which may be fixed or variable) at
which such STRYPES will bear interest, if any; (5) the dates on which such
interest, if any, will be payable; (6) the provisions for redemption of such
STRYPES, if any, the redemption price and any remarketing arrangements relating
thereto; (7) the sinking fund requirements, if any, with respect to such
STRYPES; (8) whether such STRYPES are denominated or provide for payment in
United States dollars or a foreign currency or units of two or more of such
foreign currencies; (9) whether and under what circumstances the Company will
pay additional amounts ("Additional Amounts") in respect of such STRYPES held
by a person who is not a U.S. person (as defined in the Prospectus Supplement,
as applicable) in respect of specified taxes, assessments or other governmental
charges and whether the Company has the option to redeem the affected STRYPES
rather than pay such Additional Amounts; (10) the title of the STRYPES and the
series of which such STRYPES shall be a part; and (11) the obligation of the
Company to pay and discharge such STRYPES at maturity by delivery of Underlying
Securities (or, at the Company's option, cash with an equal value), the formula
or other method by which the amount of such Underlying Securities will be
determined, and the terms and conditions upon which such payment and discharge
shall be effected. Reference is made to the Prospectus Supplement for the terms
of the STRYPES being offered thereby.
Under the Indenture, the Company will have the ability, in addition to the
ability to issue STRYPES with terms different from those of STRYPES previously
issued, to "reopen" a previous series of STRYPES and issue additional STRYPES
of such series.
Issue price and interest, premium and Additional Amounts, if any, and
Underlying Securities will be payable or deliverable in the manner, at the
places and subject to the restrictions set forth in the Indenture, the STRYPES
and the Prospectus Supplement relating thereto, provided that payment of any
interest and any Additional Amounts may be made at the option of the Company by
check mailed to the holders of registered STRYPES at their registered
addresses.
STRYPES may be presented for exchange, and registered STRYPES may be
presented for transfer, in the manner, at the places and subject to the
restrictions set forth in the Indenture, the STRYPES and the Prospectus
Supplement relating thereto. No service charge will be made for any transfer or
exchange of STRYPES, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
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RANKING
The STRYPES will be unsecured obligations and will rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. Since the
Company is a holding company, the right of the Company, and hence the right of
creditors of the Company (including the holders of the STRYPES), to participate
in any distribution of the assets of any subsidiary upon its liquidation or
reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of the Company
itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Exchange Act
and under rules of certain exchanges and other regulatory bodies.
SECURITIES DEPOSITORY
Upon issuance, each series of STRYPES will be represented by one or more
fully registered global securities (the "Global Notes"). Each such Global Note
will be deposited with, or on behalf of, The Depository Trust Company, as
Securities Depository, and registered in the name of the Securities Depository
or a nominee thereof. Unless and until it is exchanged in whole or in part for
STRYPES in definitive form under the limited circumstances described below, no
Global Note may be transferred except as a whole by the Securities Depository
to a nominee of such Securities Depository or by a nominee of such Securities
Depository to such Securities Depository or another nominee of such Securities
Depository or by such Securities Depository or any such nominee to a successor
of such Securities Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: The Securities
Depository is a limited-purpose trust company organized under the Banking Law
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 pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. The Securities Depository was
created to hold securities of its participants ("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 Securities Depository's Participants
include securities brokers and dealers (including MLPF&S), banks, trust
companies, clearing corporations, and certain other organizations.
The Securities Depository is owned by a number of Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the Securities Depository's
book-entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a Participant, either directly or indirectly ("Indirect Participants").
Purchases of STRYPES must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each STRYPES ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmations from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written confirmation providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Ownership of
beneficial interest in such Global Note will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained by
the Securities Depository (with respect to interests of Participants) and on
the records of Participants (with respect to interests of persons held through
Participants). The laws of some states may 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 own, transfer or pledge
beneficial interests in Global Notes.
So long as the Securities Depository, or its nominee, is the registered owner
of a Global Note, the Securities Depository or its nominee, as the case may be,
will be considered the sole owner or holder of the STRYPES
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represented by such Global Note for all purposes under the Indenture. Except as
provided below, Beneficial Owners in a Global Note will not be entitled to have
the STRYPES represented by such Global Notes registered in their names, will
not receive or be entitled to receive physical delivery of the STRYPES in
definitive form and will not be considered the owners or holders thereof under
the Indenture. Accordingly, each Person owning a beneficial interest in a
Global Note must rely on the procedures of the Securities Depository 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 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
Securities Depository 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.
Conveyance of notices and other communications by the Securities Depository to
Participants, by Participants to Indirect Participants, and by Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Payment of any amount with respect to STRYPES registered in the name of the
Securities Depository or its nominee will be made to the Securities Depository
or its nominee, as the case may be, as the holder of the Global Notes
representing such STRYPES. None of the Company, the Trustee or any other agent
of the Company or agent of the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests or for supervising or reviewing any records
relating to such beneficial ownership interests. The Company expects that the
Securities Depository, upon receipt of any payment in respect of a Global Note,
will credit the accounts of the Participants with payment in amounts
proportionate to their respective holdings of beneficial interest in such
Global Note as shown on the records of the Securities Depository. The Company
also expects that payments by Participants to Beneficial Owners will be
governed by standing customer instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
Participants.
If, with respect to a series of STRYPES, (x) the Securities Depository is at
any time unwilling or unable to continue as Securities Depository and a
successor depository is not appointed by the Company within 60 days, (y) the
Company executes and delivers to the Trustee a Company Order to the effect that
the Global Notes shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to any STRYPES of that series, the Company will
issue STRYPES in definitive form in exchange for all of the Global Notes
representing the STRYPES of that series. Such definitive STRYPES shall be
registered in such name or names as the Securities Depository shall instruct
the Trustee. It is expected that such instructions may be based upon directions
received by the Securities Depository from Participants with respect to
ownership of beneficial interests in such Global Notes.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other corporation, and
the Company may sell, lease or convey all or substantially all of its assets to
any corporation, provided that (i) the corporation (if other than the Company)
formed by or resulting from any such consolidation or merger or which shall
have received such assets shall be a corporation organized and existing under
the laws of the United States of America or a state thereof and shall assume
the due and punctual delivery or payment of the Underlying Securities (or cash
with an equal value) in respect of, any interest and Additional Amounts on, and
any other amounts payable with respect to, the STRYPES of each series and the
due and punctual performance and observance of all of the covenants and
conditions of the Indenture to be performed or observed by the Company, and
(ii) the Company or such successor corporation, as the case may be, shall not
immediately thereafter be in default under the Indenture.
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LIMITATIONS UPON LIENS
The Indenture provides that the Company may not, and may not permit any
Subsidiary (defined in the Indenture as any corporation of which at the time of
determination the Company and/or one or more Subsidiaries owns or controls
directly or indirectly 50% of the shares of Voting Stock of such corporation)
to, create, assume, incur or permit to exist any indebtedness for borrowed
money secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Indenture) on the Voting Stock owned directly or
indirectly by the Company of any Subsidiary (other than a Subsidiary which, at
the time of incurrence of such secured indebtedness, has a net worth of less
than $3,000,000) without making effective provision whereby the Outstanding
STRYPES will be secured equally and ratably with such secured indebtedness.
LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or otherwise
dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue, sell or
otherwise dispose of any of its Voting Stock, unless, after giving effect to
any such transaction, MLPF&S remains a Controlled Subsidiary (defined in the
Indenture to mean a corporation more than 80% of the outstanding shares of
Voting Stock of which are owned directly or indirectly by the Company). In
addition, the Indenture provides that the Company may not permit MLPF&S to (i)
merge or consolidate, unless the surviving company is a Controlled Subsidiary,
or (ii) convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
EVENTS OF DEFAULT
Unless otherwise specified in a Prospectus Supplement, each of the following
will constitute an Event of Default under the Indenture with respect to each
series of STRYPES: (a) failure to pay and discharge the STRYPES of that series
with the Underlying Securities or, if the Company so elects, to pay an
equivalent amount in cash in lieu thereof when due; (b) failure to pay the
Redemption Price or any redemption premium with respect to any STRYPES of that
series when due; (c) failure to deposit any sinking fund payment, when and as
due by the terms of any STRYPES of that series; (d) failure to pay any interest
on or any Additional Amounts in respect of any STRYPES of that series when due,
continued for 30 days; (e) failure to perform any other covenant of the Company
contained in the Indenture for the benefit of that series or in the STRYPES of
that series, continued for 60 days after written notice has been given to the
Company by the Trustee, or to the Company and the Trustee by the holders of at
least 10% of the aggregate issue price of the Outstanding STRYPES of that
series, as provided in the Indenture; (f) certain events in bankruptcy,
insolvency or reorganization of the Company; and (g) any other Event of Default
provided with respect to STRYPES of that series.
Unless otherwise specified in a Prospectus Supplement, if an Event of Default
(other than an Event of Default described in clause (f) of the immediately
preceding paragraph) with respect to the STRYPES of any series shall occur and
be continuing, either the Trustee or the holders of at least 25% of the
aggregate issue price of the Outstanding STRYPES of that series by notice as
provided in the Indenture may declare an amount equal to the aggregate issue
price of all the STRYPES of that series and the interest accrued thereon and
Additional Amounts payable in respect thereof, if any, to be immediately due
and payable in cash. If an Event of Default described in said clause (f) shall
occur, an amount equal to the aggregate issue price of all the STRYPES of that
series and the interest accrued thereon and Additional Amounts payable in
respect thereof, if any, will become immediately due and payable in cash
without any declaration or other action on the part of the Trustee or any
holder. After such acceleration, but before a judgment or decree based on
acceleration, the holders of a majority of the aggregate issue price of the
Outstanding STRYPES of that series may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than the non-
payment of the amount equal to the aggregate issue price of all the STRYPES of
that series due by reason of such acceleration, have been cured or waived as
provided in the Indenture. See "Modification and Waiver" below.
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Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of STRYPES of any
series, unless such holders of that series shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in compliance with such request or direction.
Subject to such provisions for the indemnification of the Trustee, the holders
of a majority of the aggregate issue price of the STRYPES of any series will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to the STRYPES of that series.
The Company will be required to furnish to the Trustee annually a statement
by certain of its officers as to whether or not the Company, to their
knowledge, is in default in the fulfillment of any of its obligations under the
Indenture and, if so, specifying all such known defaults.
The STRYPES and other series of Senior Debt Securities issued under the
Indenture will not have the benefit of any cross-default provisions with other
indebtedness of the Company.
MODIFICATION AND WAIVER
Unless otherwise specified in a Prospectus Supplement, modifications of and
amendments to the Indenture affecting a series of STRYPES may be made by the
Company and the Trustee with the consent of the holders of 66 2/3% of the
aggregate issue price of the Outstanding STRYPES of such series; provided,
however, that no such modification or amendment may, without the consent of the
holder of each Outstanding STRYPES of such series affected thereby, (a) change
the Maturity Date or the Stated Maturity of any installment of interest or
Additional Amounts on any STRYPES or any premium payable on the redemption
thereof, or change the Redemption Price, (b) reduce the amount of Underlying
Securities payable with respect to any STRYPES (or reduce the amount of cash
payable in lieu thereof), (c) reduce the amount of interest or Additional
Amounts payable on any STRYPES or reduce the amount of cash payable with
respect to any STRYPES upon acceleration of the maturity thereof, (d) change
the place or currency of payment of interest or Additional Amounts on, or any
amount of cash payable with respect to, any STRYPES, (e) impair the right to
institute suit for the enforcement of any payment on or with respect to any
STRYPES, including the payment of Underlying Securities with respect to any
STRYPES, (f) reduce the percentage of the aggregate issue price of Outstanding
STRYPES of such series, the consent of whose holders is required to modify or
amend the Indenture, (g) reduce the percentage of the aggregate issue price of
Outstanding STRYPES of such series necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults or (h)
modify such provisions with respect to modification and waiver. Except as
provided in the Indenture, no modification of or amendment to the Indenture may
adversely affect the rights of a holder of any other Senior Debt Security
without the consent of such holder.
The holders of a majority of the aggregate issue price of each series of
STRYPES may waive compliance by the Company with certain restrictive provisions
of the Indenture. The holders of a majority of the aggregate issue price of
each series of STRYPES may waive any past default under the Indenture, except a
default in the payment of the Underlying Securities with respect to any STRYPES
of that series, or of cash payable in lieu thereof, or in the payment of any
premium, interest or Additional Amounts on any STRYPES of that series for which
payment had not been subsequently made or in respect of a covenant and
provision of the Indenture which cannot be modified or amended without the
consent of the holder of each Outstanding STRYPES of such series affected.
GOVERNING LAW
The Indenture and the STRYPES will be governed by, and construed in
accordance with, the laws of the State of New York.
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UNDERWRITING
The Company may sell STRYPES to the public through MLPF&S. The accompanying
Prospectus Supplement describes the terms of the STRYPES offered thereby,
including the public offering or purchase price, any discounts and commissions
to be allowed or paid to MLPF&S, all other items constituting underwriting
compensation, the discounts and commissions to be allowed or paid to dealers,
if any, and the exchanges, if any, on which the STRYPES will be listed. Only
MLPF&S will act as an underwriter in connection with the STRYPES. Under certain
circumstances, the Company may repurchase STRYPES and reoffer them to the
public as set forth above. The Company may also arrange for repurchases and
resales of such STRYPES by dealers.
The underwriting of STRYPES will conform to the requirements set forth in the
applicable sections of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K, and incorporated by
reference in this Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The information under the caption "Summary Financial Information" for
each of the five years in the period ended December 30, 1994 included in this
Prospectus and the Selected Financial Data under the captions "Operating
Results," "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual Report
to Stockholders of the Company, and incorporated by reference herein, has been
derived from consolidated financial statements audited by Deloitte & Touche
LLP, as set forth in their reports incorporated by reference herein. Such
consolidated financial statements and related financial statement schedules,
such Summary Financial Information and Selected Financial Data appearing or
incorporated by reference in this Prospectus and the Registration Statement of
which this Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in any such Quarterly Report on
Form 10-Q and incorporated by reference herein, they did not audit and they do
not express an opinion on such interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Securities
Act for any such report on unaudited interim financial information because any
such report is not a "report" or a "part" of the Registration Statement
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Securities Act.
16
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED , 1995)
LOGO
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
-----------
Merrill Lynch & Co., Inc. (the "Company") may offer from time to time up to
$ aggregate principal amount (except that with respect to Notes
sold at a discount, the initial offering price will be used), or the equivalent
thereof in one or more foreign currencies or currency units, of its Medium-Term
Notes, Series B (the "Notes"). Each Note will mature on a day nine months or
more from the date of issue, as selected by the purchaser and agreed to by the
Company, and may be subject to redemption by the Company or repayment at the
option of the Holder thereof, in each case, in whole or in part, prior to its
Stated Maturity, as set forth therein and specified in a pricing supplement
hereto (each, a "Pricing Supplement").
The interest rate, if any, or the formula for the determination of any such
interest rate, applicable to each Note and other variable terms of the Notes as
described herein will be established by the Company at the date of issue of
such Note and will be set forth therein and specified in a Pricing Supplement.
Interest rates, interest rate formulae and such other variable terms are
subject to change by the Company, but no change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or certificated form (a "Certificated Note"), as set forth in the
applicable Pricing Supplement, in denominations of $1,000 and integral
multiples thereof, unless otherwise specified in the applicable Pricing
Supplement. Each Book-Entry Note will be represented by one or more global
securities ("Global Notes") deposited with or on behalf of The Depository Trust
Company (or such other depository as is identified in an applicable Pricing
Supplement) (the "Depository") and registered in the name of the Depository's
nominee. Beneficial interests in Book-Entry Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository (with respect to its participants) and the Depository's participants
(with respect to Beneficial Owners). Beneficial Owners of the Book-Entry Notes
will not have the right to receive physical certificates evidencing their
ownership except under the limited circumstances described herein.
Unless otherwise specified in an applicable Pricing Supplement, the Notes
will bear interest at fixed rates (the "Fixed Rate Notes") or at floating rates
(the "Floating Rate Notes"). The applicable Pricing Supplement will specify
whether a Floating Rate Note is a Floating Rate/Fixed Rate Note, Inverse
Floating Rate Note or Regular Floating Rate Note and whether its rate of
interest is determined by reference to one or more of the CD Rate, the
Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the Federal
Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an "Interest Rate
Basis"), or any other interest rate basis or formula, as adjusted by any Spread
and/or Spread Multiplier and will specify such other terms applicable to such
Note. Interest rates offered by the Company with respect to the Notes may
differ depending upon the aggregate principal amount of Notes subject to
purchase in any single transaction, and the Company expects generally to
distinguish, with respect to such offered rates, between purchases which are
for less than, and purchases which are for an amount equal to or greater than,
$100,000. See "Description of Notes."
-----------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGENT'S DISCOUNTS
PRICE TO AND PROCEEDS TO
PUBLIC (1) COMMISSIONS(1)(2) COMPANY(1)(3)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note....... 100% .125% --.750% 99.875% --99.250%
- ----------------------------------------------------------------------------
$ --
Total(4)....... $ $ $ --$
- ----------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the "Agent") will purchase the Notes, as principal, from the Company, for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the Agent,
or, if so specified in an applicable Pricing Supplement, for resale at a
fixed public offering price. Unless otherwise specified in an applicable
Pricing Supplement, any Note sold to the Agent as principal will be
purchased by such Agent at a price equal to 100% of the principal amount
thereof less a percentage of the principal amount equal to the commission
applicable to an agency sale (as described below) of a Note of identical
maturity. If agreed to by the Company and the Agent, the Agent may utilize
their reasonable efforts on an agency basis to solicit offers to purchase
the Notes at 100% of the principal amount thereof, unless otherwise
specified in an applicable Pricing Supplement. The Company will pay a
commission to an Agent, ranging from .125% to .750% (or, with respect to
Notes for which the Stated Maturity is in excess of 30 years, such
commission as shall be agreed upon by the Company and the related Agent at
the time of sale) of the principal amount of a Note, depending upon its
Stated Maturity, sold through such Agent.
(2) The Company has agreed to indemnify the Agent against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(3) Before deducting expenses payable by the Company.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
-----------
The Notes are being offered on a continuing basis by the Company through the
Agent. Unless otherwise specified in an applicable Pricing Supplement, the
Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered by this Prospectus Supplement will be sold or
that there will be a secondary market for the Notes. The Company reserves the
right to cancel or modify the offer made hereby without notice. The Company or
the Agent, if it solicits the offer, may reject any offer to purchase Notes in
whole or in part. See "Plan of Distribution."
This Prospectus Supplement and the accompanying Prospectus may be used by the
Agent, a wholly-owned subsidiary of the Company, in connection with offers and
sales related to market-making transactions in the Notes. The Agent may act as
principal or agent in such transactions.
-----------
MERRILL LYNCH & CO.
-----------
The date of this Prospectus Supplement is , 1995.
<PAGE>
IN CONNECTION WITH ANY OFFERING OF NOTES OFFERED TO THE PUBLIC ON A FIXED
PRICE BASIS (AS INDICATED IN THE APPLICABLE PRICING SUPPLEMENT), THE AGENT
(ACTING AS PRINCIPAL) MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR
MAINTAIN THE MARKET PRICE OF SUCH NOTES AT LEVELS ABOVE THOSE WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
The Commissioner of Insurance of the State of North Carolina has not approved
or disapproved this offering nor has the Commissioner passed upon the accuracy
or adequacy of this Prospectus Supplement or Prospectus.
DESCRIPTION OF NOTES
The Notes will be issued as a series of debt securities under a senior
indenture, dated as of October 1, 1993 (the "Chase Indenture"), between the
Company and The Chase Manhattan Bank (National Association), as trustee (as
used in this Prospectus Supplement, the "Trustee"). The term "Senior Debt
Securities," as used in this Prospectus Supplement, refers to all securities
issued and issuable from time to time under the Senior Indentures and includes
the Notes. The Senior Debt Securities and the Trustee are more fully described
in the accompanying Prospectus. The following summary of certain provisions of
the Notes and of the Chase Indenture does not purport to be complete and is
qualified in its entirety by reference to the Chase Indenture, a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus Supplement and the accompanying Prospectus are a part. Capitalized
terms used but not defined herein have the meanings given to them in the Chase
Indenture or the Notes, as the case may be.
THE FOLLOWING DESCRIPTION OF NOTES WILL APPLY UNLESS OTHERWISE SPECIFIED IN
AN APPLICABLE PRICING SUPPLEMENT.
GENERAL
All Senior Debt Securities, including the Notes, issued and to be issued
under the Senior Indentures will be unsecured general obligations of the
Company and will rank pari passu with all other unsecured and unsubordinated
indebtedness of the Company from time to time outstanding. However, because the
Company is a holding company, the right of the Company, and hence the right of
creditors of the Company (including the Holders of the Notes), to participate
in any distribution of the assets of any subsidiary upon its liquidation or
reorganization or otherwise is necessarily subject to the prior claims of
creditors of the subsidiary, except to the extent that claims of the Company
itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including Merrill
Lynch, Pierce, Fenner & Smith Incorporated, to the Company are restricted by
net capital requirements under the Securities Exchange Act of 1934, as amended,
and under rules of certain exchanges and other regulatory bodies.
The Senior Indentures do not limit the aggregate principal amount of Senior
Debt Securities which may be issued thereunder and Senior Debt Securities may
be issued thereunder from time to time as a single series or in two or more
separate series up to the aggregate principal amount from time to time
authorized by the Company for each series. The Company may, from time to time,
without the consent of the Holders of the Notes, provide for the issuance of
Notes or other Senior Debt Securities under the Senior Indentures in addition
to the $ aggregate principal amount of Notes offered hereby. The
aggregate principal amount of Notes which may be offered hereby may be reduced
by the issuance of other securities of the Company pursuant to the registration
statement of which this Prospectus Supplement and the accompanying Prospectus
are a part.
The Notes will be offered on a continuing basis and will mature on a day nine
months or more from the date of issue, as selected by the purchaser and agreed
to by the Company. Interest-bearing Notes will either be Fixed Rate Notes or
Floating Rate Notes as specified in the applicable Pricing Supplement. Notes
may be issued at significant discounts from their principal amount payable at
Stated Maturity (or on any prior date on which the principal or an installment
of principal of a Note becomes due and payable, whether by the
S-2
<PAGE>
declaration of acceleration, call for redemption at the option of the Company,
repayment at the option of the Holder or otherwise) (each such date, a
"Maturity"), and some Notes may not bear interest.
Unless otherwise indicated in a Note and in the applicable Pricing
Supplement, the Notes will be denominated in United States dollars and payments
of principal of, and premium, if any, and interest on, the Notes will be made
in United States dollars. If any of the Notes to be denominated other than in
United States dollars or if the principal of, and interest on, the Notes, and
any premium provided for in any Note is to be payable in or by reference to a
currency (or in composite currency units or in amounts determined by reference
to one or more currencies) other than that in which such Note is denominated,
provisions with respect thereto will be set forth in such Note and in the
applicable Pricing Supplement.
Interest rates, interest rate formulae and other variable terms of the Notes
are subject to change by the Company from time to time, but no such change will
affect any Note already issued or as to which an offer to purchase has been
accepted by the Company.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or certificated form (a "Certificated Note"), in denominations of $1,000
and integral multiples thereof, unless otherwise specified in the applicable
Pricing Supplement. Book-Entry Notes may be transferred or exchanged only
through a participating member of The Depository Trust Company (or such other
depository as is identified in an applicable Pricing Supplement) (the
"Depository"). See "Book-Entry Notes." Registration of transfer of Certificated
Notes will be made at the Corporate Trust Office of the Trustee. No service
charge will be made by the Company, the Trustee or the Security Registrar for
any such registration of transfer or exchange of Notes, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith (other than exchanges pursuant to the
Chase Indenture, not involving any transfer).
Payments of principal of, and premium and interest, if any, on Book-Entry
Notes will be made by the Company through the Trustee to the Depository or its
nominee. See "Book-Entry Notes." Unless otherwise specified in the applicable
Pricing Supplement, a Beneficial Owner of Book-Entry Notes denominated in a
currency other than United States dollars (a "Specified Currency") electing to
receive payments of principal or any premium or interest in such Specified
Currency must notify the Participant through which its interest is held on or
prior to the applicable Record Date, in the case of a payment of interest, and
on or prior to the sixteenth day, whether or not a Business Day (as defined
below), prior to its Stated Maturity, in the case of principal or premium, of
such Beneficial Owner's election to receive all or a portion of such payment in
a Specified Currency. Such Participant must notify the Depository of such
election on or prior to the third Business Day after such Record Date. The
Depository will notify the Paying Agent of such election on or prior to the
fifth Business Day after such Record Date. If complete instructions are
received by the Participant and forwarded by the Participant to the Depository,
and by the Depository to the Paying Agent, on or prior to such dates, the
Beneficial Owner will receive payments in the Specified Currency.
In the case of Certificated Notes, payment of principal or premium, if any,
at the Maturity of each Certificated Note will be made in immediately available
funds upon presentation of the Certificated Note at the Corporate Trust Office
of the Trustee in the Borough of Manhattan, The City of New York, or at such
other place as the Company may designate. Payment of interest due at Maturity
will be made to the person to whom payment of the principal of the Certificated
Note shall be made. Payment of interest due on Certificated Notes other than at
Maturity will be made at the Corporate Trust Office of the Trustee or, at the
option of the Company, may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.
Notwithstanding the foregoing, a Holder of $1,000,000 or more in aggregate
principal amount of Certificated Notes having the same Interest Payment Dates
will, at the option of the Company, be entitled to receive interest payments
(other than at Maturity) by wire transfer of immediately available funds if
appropriate wire transfer instructions have been received in writing by the
Trustee not less than 15 days prior to the applicable Interest Payment Date.
S-3
<PAGE>
TRANSACTION AMOUNT
Interest rates offered by the Company with respect to the Notes may differ
depending upon the aggregate principal amount of Notes purchased in any
transaction. The Company expects generally to distinguish, with respect to such
offered rates, between purchases which are for less than, and purchases which
are equal to or greater than, $100,000. Such different rates may be offered
concurrently at any time. The Company may also concurrently offer Notes having
different variable terms (as are described herein or in any Prospectus
Supplement) to different investors, and such different offers may depend upon
whether an offered purchase is for an aggregate principal amount of Notes equal
to or greater than, or for an amount less than $100,000.
REDEMPTION AT THE OPTION OF THE COMPANY
The Notes will not be subject to any sinking fund. The Notes will be
redeemable at the option of the Company prior to their Stated Maturity only if
an Initial Redemption Date is specified therein and in the applicable Pricing
Supplement. If so indicated in the applicable Pricing Supplement, Notes will be
subject to redemption at the option of the Company on any date on and after the
applicable Initial Redemption Date specified in such Pricing Supplement. On and
after the Initial Redemption Date, if any, the related Note may be redeemed at
any time in whole or from time to time in part (in increments of $1,000,
provided that any remaining principal amount shall be an authorized
denomination of the applicable Note) at the option of the Company at the
applicable Redemption Price (as defined below) together with interest thereon
payable to the Redemption Date, on notice given not more than 60 nor less than
30 days prior to the Redemption Date. "Redemption Price" with respect to a Note
will initially mean a percentage, the Initial Redemption Percentage, of the
principal amount of such Note to be redeemed specified in the applicable
Pricing Supplement and shall decline at each anniversary of the Initial
Redemption Date by a percentage, the Annual Redemption Percentage Reduction, if
any, specified in the applicable Pricing Supplement, of the principal amount to
be redeemed until the Redemption Price is 100% of such principal amount.
REPAYMENT AT THE OPTION OF THE HOLDER
If so indicated in an applicable Pricing Supplement, Notes will be repayable
by the Company in whole or in part at the option of the Holders thereof on
their respective Optional Repayment Dates specified in such Pricing Supplement.
If no Optional Repayment Date is indicated with respect to a Note, such Note
will not be repayable at the option of the Holder prior to its Stated Maturity.
Any repayment in part will be in an amount equal to $1,000 or integral
multiples thereof, provided that any remaining principal amount shall be an
authorized denomination of the applicable Note. The repurchase price for any
Note so repurchased will be 100% of the principal amount to be repaid, together
with interest thereon payable to the date of repayment.
While the Book-Entry Notes are represented by Global Notes held by or on
behalf of the Depository, and registered in the name of the Depository or the
Depository's nominee, the option for repayment may be exercised by the
applicable Participant (as defined below under "Book-Entry Notes") on behalf of
the Beneficial Owners (as defined below) of such Book-Entry Notes by delivering
a written notice to the Trustee at the Corporate Trust Office, not more than 60
nor less than 30 days prior to the Optional Repayment Date. Notices of
elections from Participants on behalf of Beneficial Owners of the Book-Entry
Notes to exercise their option to have the Book-Entry Notes repaid must be
received by the Trustee by 5:00 p.m., New York City time, on the last day for
giving such notice. In order to ensure that a notice is received by the Trustee
on a particular day, the Beneficial Owner of Book-Entry Notes must so direct
the applicable Participant before such Participant's cut-off time for accepting
instructions for that day. Different firms may have different cut-off times for
accepting instructions from their customers. Accordingly, Beneficial Owners of
Book-Entry Notes should consult the Participants through which they own their
interest in the Book-Entry Notes for the cut-off times for such Participants.
All notices shall be executed by a duly authorized officer of such Participant
(with signature guaranteed) and shall be irrevocable. In addition, such
Beneficial Owners of Book-Entry Notes shall effect delivery of such Book-Entry
Notes at the time such notices of election are given to the Depository by
causing the Participant to transfer such Beneficial Owner's interest in the
Book-Entry Notes, on the Depository's records, to the Trustee. Conveyance of
notices and other communications by the Depository to Participants, by
Participants to Indirect Participants (as defined below) and by Participants
S-4
<PAGE>
and Indirect Participants to Beneficial Owners of the Book-Entry Notes will be
governed by agreements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
INTEREST
General
Each Note will bear interest from the date of issue at the rate per annum or,
in the case of a Floating Rate Note, pursuant to the interest rate formula
stated therein and in the applicable Pricing Supplement until the principal
thereof is paid or made available for payment. Interest will be payable in
arrears on each date specified in the applicable Pricing Supplement on which an
installment of interest is due and payable (an "Interest Payment Date") and at
Maturity. The first payment of interest on any Note originally issued between a
Regular Record Date and the related Interest Payment Date will be made on the
Interest Payment Date immediately following the next succeeding Regular Record
Date to the registered Holder on such next succeeding Regular Record Date. The
"Regular Record Date" shall be the fifteenth calendar day (whether or not a
Business Day) immediately preceding the related Interest Payment Date.
Fixed Rate Notes
Unless otherwise specified in an applicable Pricing Supplement, each Fixed
Rate Note will bear interest from, and including, the date of issue, at the
rate per annum stated on the face thereof until the principal amount thereof is
paid or made available for payment. Interest payments on Fixed Rate Notes will
equal the amount of interest accrued from and including the immediately
preceding Interest Payment Date in respect of which interest has been paid (or
from and including the date of issue, if no interest has been paid with respect
to such Fixed Rate Notes), to, but excluding, the related Interest Payment Date
or Maturity, as the case may be. Unless otherwise specified in the applicable
Pricing Supplement, interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable semiannually on May 15 and November 15 of each
year and at Maturity. If any Interest Payment Date or the Maturity of a Fixed
Rate Note falls on a day that is not a Business Day, the related payment of
principal, premium, if any, or interest will be made on the next succeeding
Business Day as if made on the date such payment was due, and no interest will
accrue on the amount so payable for the period from and after such Interest
Payment Date or Maturity, as the case may be.
Floating Rate Notes
Floating Rate Notes will be issued as described below. Each applicable
Pricing Supplement will specify certain terms with respect to which such
Floating Rate Note is being delivered, including: whether such Floating Rate
Note is a "Regular Floating Rate Note" (as defined below), an "Inverse Floating
Rate Note" (as defined below) or a "Floating Rate/Fixed Rate Note" (as defined
below); the Interest Rate Basis or Bases, Initial Interest Rate, Interest Reset
Dates, Interest Payment Dates, Index Maturity, Maximum Interest Rate and
Minimum Interest Rate, if any, and the Spread and/or Spread Multiplier, if any,
and if one or more of the specified Interest Rate Bases is LIBOR, the Index
Currency, the Index Maturity and the Designated LIBOR Page, as described below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a Floating Rate/Fixed
Rate Note, an Inverse Floating Rate Note or as having an Addendum attached,
such Floating Rate Note will be designated a "Regular Floating Rate Note"
and, except as described below or in an applicable Pricing Supplement, bear
interest at the rate determined by reference to the applicable Interest
Rate Basis (i) plus or minus the applicable Spread, if any, and/or (ii)
multiplied by the applicable Spread Multiplier, if any. Commencing on the
first Interest Reset Date, the rate at which interest on such Regular
Floating Rate Note shall be payable shall be reset as of each Interest
Reset Date; provided, however, that the interest rate in effect for the
period from the Original Issue Date to the first Interest Reset Date will
be the Initial Interest Rate.
S-5
<PAGE>
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note", then such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis (i) plus or
minus the applicable Spread, if any, and/or (ii) multiplied by the
applicable Spread Multiplier, if any. Commencing on the first Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (i) the interest rate in effect for the period from
the Original Issue Date to the first Interest Reset Date will be the
Initial Interest Rate, and (ii) the interest rate in effect commencing on,
and including, the Fixed Rate Commencement Date to Maturity shall be the
Fixed Interest Rate, if such rate is specified in the applicable Pricing
Supplement, or if no such Fixed Interest Rate is so specified, the interest
rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below, such Floating Rate Note will
bear interest equal to the Fixed Interest Rate specified in the related
Pricing Supplement minus the rate determined by reference to the applicable
Interest Rate Basis (i) plus or minus the applicable Spread, if any, and/or
(ii) multiplied by the applicable Spread Multiplier, if any; provided,
however, that unless otherwise specified in the applicable Pricing
Supplement, the interest rate thereon will not be less than zero percent.
Commencing on the first Interest Reset Date, the rate at which interest on
such Inverse Floating Rate Note is payable shall be reset as of each
Interest Reset Date; provided, however, that the interest rate in effect
for the period from the Original Issue Date to the first Interest Reset
Date will be the Initial Interest Rate.
Notwithstanding the foregoing, if such Floating Rate Note is designated as
having an Addendum attached as specified on the face thereof, such Floating
Rate Note shall bear interest in accordance with the terms described in such
Addendum and the applicable Pricing Supplement.
Each Interest Rate Basis shall be the rate determined in accordance with the
applicable provisions below. Except as set forth above, the interest rate in
effect on each day shall be (a) if such day is an Interest Reset Date, the
interest rate determined as of the Interest Determination Date (as defined
below) immediately preceding such Interest Reset Date or (b) if such day is not
an Interest Reset Date, the interest rate determined as of the Interest
Determination Date immediately preceding the applicable Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to an
"Interest Rate Basis," which may be one or more of (i) the "CD Rate," (ii) the
"Commercial Paper Rate," (iii) the "Eleventh District Cost of Funds Rate," (iv)
the "Federal Funds Rate," (v) "LIBOR," (vi) the "Prime Rate," (vii) the
"Treasury Rate," or (viii) such other Interest Rate Basis or interest rate
formula as may be set forth in the applicable Pricing Supplement. In addition,
a Floating Rate Note may bear interest in respect of two or more Interest Rate
Bases.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate Note.
The "Spread Multiplier" is the percentage of the related Interest Rate Basis or
Bases applicable to such Floating Rate Note by which such Interest Rate Basis
or Bases will be multiplied to determine the applicable interest rate on such
Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the Interest Rate Basis or Bases
will be calculated.
Each applicable Pricing Supplement will specify the dates on which such
Interest Rate will be reset (each, an "Interest Reset Date"). Unless otherwise
specified in the applicable Pricing Supplement, the Interest Reset Date will
be, in the case of Floating Rate Notes which reset: (i) daily, each Business
Day; (ii) weekly, the Wednesday of each week (with the exception of weekly
reset Treasury Rate Notes which will reset the Tuesday of each week, except as
specified below); (iii) monthly, the third Wednesday of each month (with the
exception of monthly reset Eleventh District Cost of Funds Rate Notes, which
will reset on the first calendar day of the month); (iv) quarterly, the third
Wednesday of March, June, September and December of each year; (v)
semiannually, the third Wednesday of the two months specified in the applicable
Pricing Supplement; and (vi) annually, the third Wednesday of the month
specified in the applicable Pricing Supplement; provided, however, that with
respect to Floating Rate/Fixed Rate Notes, the fixed rate of
S-6
<PAGE>
interest in effect for the period from the Fixed Rate Commencement Date until
Maturity shall be the Fixed Interest Rate or the interest rate in effect on the
day immediately preceding the Fixed Rate Commencement Date, as specified in the
applicable Pricing Supplement. If any Interest Reset Date for any Floating Rate
Note would otherwise be a day that is not a Business Day, such Interest Reset
Date will be postponed to the next succeeding day that is a Business Day,
except that in the case of a Floating Rate Note as to which LIBOR is an
applicable Interest Rate Basis, if such Business Day falls in the next
succeeding calendar month, such Interest Reset Date will be the immediately
preceding Business Day. As used herein, "Business Day" means any day other than
a Saturday or Sunday or any other day on which banks in The City of New York
are generally authorized or obligated by law or executive order to close and,
with respect to Notes as to which LIBOR is an applicable Interest Rate Basis,
is also a London Business Day. As used herein, "London Business Day" means any
day (a) if the Index Currency (as defined below) is other than the European
Currency Unit ("ECU"), on which dealings in deposits in such Index Currency are
transacted in the London interbank market or (b) if the Index Currency is the
ECU, that is not designated as an ECU Non-Settlement Day by the ECU Banking
Association in Paris or otherwise generally regarded in the ECU interbank
market as a day on which payments on ECUs shall not be made.
A Floating Rate Note may also have either or both of the following: (i) a
maximum numerical limitation, or ceiling, on the rate at which interest may
accrue during any interest period (a "Maximum Interest Rate"), and (ii) a
minimum numerical limitation, or floor, on the rate at which interest may
accrue during any period (a "Minimum Interest Rate"). The Indenture provides
that the Indenture and the Securities will be governed by and construed in
accordance with the laws of the state of New York. Under present New York law,
the maximum rate of interest is 25% per annum on a simple interest basis. This
limit may not apply to Securities in which $2,500,000 or more has been
invested. While the Company believes that New York law would be given effect by
a state or federal court sitting outside of New York, state laws frequently
regulate the amount of interest that may be charged to and paid by a borrower
(including, in some cases, corporate borrowers). It is suggested that
prospective investors consult their personal advisors with respect to the
applicability of such laws. The Company has covenanted for the benefit of the
beneficial owners of the Securities, to the extent permitted by law, not to
claim voluntarily the benefits of any laws concerning usurious rates of
interest against a beneficial owner of the Securities.
Each applicable Pricing Supplement will specify the dates on which interest
will be payable (each an "Interest Payment Date"). Each Floating Rate Note will
bear interest from the date of issue at the rates specified therein until the
principal thereof is paid or otherwise made available for payment. Unless
otherwise specified in the applicable Pricing Supplement and, except as
provided below, interest will be payable in the case of Floating Rate Notes
which reset: (i) daily, weekly or monthly, on the third Wednesday of each month
or on the third Wednesday of March, June, September and December of each year
as specified in the applicable Pricing Supplement; (ii) quarterly, on the third
Wednesday of March, June, September and December of each year; (iii)
semiannually, on the third Wednesday of the two months of each year specified
in the applicable Pricing Supplement; and (iv) annually, on the third Wednesday
of the month of each year specified in the applicable Pricing Supplement and,
in each case, at Maturity. If any Interest Payment Date for any Floating Rate
Note (other than an Interest Payment Date at Maturity) would otherwise be a day
that is not a Business Day, such Interest Payment Date will be postponed to the
next succeeding day that is a Business Day except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis, if
such Business Day falls in the next succeeding calendar month, such Interest
Payment Date will be the immediately preceding Business Day. If the Maturity of
a Floating Rate Note falls on a day that is not a Business Day, the payment of
principal, premium, if any, and interest will be made on the next succeeding
Business Day, and no interest on such payment will accrue for the period from
and after such Maturity.
All percentages resulting from any calculation on Floating Rate Notes will be
rounded to the nearest one hundred-thousandth of a percentage point, with five
one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all dollar amounts
used in or resulting from such calculation on Floating Rate Notes will be
rounded to the nearest cent (with one-half cent being rounded upward).
S-7
<PAGE>
Interest payments on Floating Rate Notes will equal the amount of interest
accrued from and including the immediately preceding Interest Payment Date in
respect of which interest has been paid (or from and including the date of
issue, if no interest has been paid with respect to such Floating Rate Notes),
to but excluding the related Interest Payment Date or Maturity.
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the period for which accrued interest is being calculated. The interest
factor for each such day will be computed by dividing the interest rate
applicable to such day by 360, in the case of Notes for which the Interest Rate
Basis is the CD Rate, the Commercial Paper Rate, the Eleventh District Cost of
Funds Rate, the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual
number of days in the year in the case of Notes for which the Interest Rate
Basis is the Treasury Rate. The interest factor for Notes for which the
interest rate is calculated with reference to two or more Interest Rate Bases
will be calculated in each period in the same manner as if only one of the
applicable Interest Rate Bases applied.
The interest rate applicable to each interest reset period commencing on the
Interest Reset Date with respect to such interest reset period will be the rate
determined as of the applicable "Interest Determination Date." The Interest
Determination Date with respect to the CD Rate and the Commercial Paper Rate
will be the second Business Day preceding each Interest Reset Date for the
related Note; the Interest Determination Date with respect to the Federal Funds
Rate and the Prime Rate, unless otherwise specified in the applicable Pricing
Supplement, will be the Business Day immediately preceding each Interest Reset
Date; the Interest Determination Date with respect to the Eleventh District
Cost of Funds Rate will be the last working day of the month immediately
preceding each Interest Reset Date on which the Federal Home Loan Bank of San
Francisco (the "FHLB of San Francisco") publishes the Index (as defined below);
the Interest Determination Date with respect to LIBOR will be the second London
Business Day preceding each Interest Reset Date. With respect to the Treasury
Rate, unless otherwise specified in an applicable Pricing Supplement, the
Interest Determination Date will be the day in the week in which the related
Interest Reset Date falls on which day Treasury Bills (as defined below) are
normally auctioned (Treasury Bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
normally held on the following Tuesday, except that such auction may be held on
the preceding Friday); provided, however, that if an auction is held on the
Friday of the week preceding the related Interest Reset Date, the related
Interest Determination Date will be such preceding Friday; and provided,
further, that if an auction falls on any Interest Reset Date, then the related
Interest Reset Date will instead be the first Business Day following such
auction. Unless otherwise specified in the applicable Pricing Supplement, the
Interest Determination Date pertaining to a Floating Rate Note the interest
rate of which is determined with reference to two or more Interest Rate Bases
will be the latest Business Day which is at least two Business Days prior to
such Interest Reset Date for such Floating Rate Note on which each Interest
Reset Basis is determinable. Each Interest Rate Basis will be determined on
such date, and the applicable interest rate will take effect on the related
Interest Reset Date.
Unless otherwise provided in the applicable Pricing Supplement, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, a subsidiary of the Company, will
be the "Calculation Agent." 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 that will become effective as a result of a
determination made for the next Interest Reset Date with respect to such
Floating Rate Note. Unless otherwise specified in the applicable Pricing
Supplement, the "Calculation Date," if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date, or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day preceding the applicable
Interest Payment Date or Maturity, as the case may be.
CD Rate. CD Rate Notes will bear interest at the rates (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any)
specified in such CD Rate Notes and in any applicable Pricing Supplement.
S-8
<PAGE>
"CD Rate" means, with respect to any Interest Determination Date relating to
a CD Rate Note or any Floating Rate Note for which the interest rate is
determined with reference to the CD Rate (a "CD Rate Interest Determination
Date"), the rate on such date for negotiable certificates of deposit having the
Index Maturity specified in the applicable Pricing Supplement as published by
the Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable certificates of deposit of the Index
Maturity specified in the applicable Pricing Supplement as 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 ("Composite Quotations") under the heading "Certificates of
Deposit." If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination 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 City time, on such CD Rate
Interest Determination Date, of three leading non-bank dealers in negotiable
United States dollar certificates of deposit in The City of New York selected
by the Calculation Agent for negotiable certificates of deposit of major United
States money market banks with a remaining maturity closest to the Index
Maturity designated in the applicable Pricing Supplement in an amount that is
representative for a single transaction in that market at that time; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as set forth above, the CD Rate with respect to such CD Rate Interest
Determination Date will be the CD Rate in effect on such CD Rate Interest
Determination Date.
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at the
rates (calculated with reference to the Commercial Paper Rate and the Spread
and/or Spread Multiplier, if any) specified in such Commercial Paper Rate Notes
and in any applicable Pricing Supplement.
"Commercial Paper Rate" means, with respect to any Interest Determination
Date relating to a Commercial Paper Rate Note or any Floating Rate Note for
which the interest rate is determined with reference to the Commercial Paper
Rate (a "Commercial Paper Rate Interest Determination Date"), the Money Market
Yield (as defined below) on such date of the rate for commercial paper having
the Index Maturity specified in the applicable Pricing Supplement as published
by the Board of Governors of the Federal Reserve System in H.15(519) under the
heading "Commercial Paper." In the event that such rate is not published by
3:00 P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate will be the Money Market Yield on such Commercial Paper
Rate Interest Determination Date of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an Index
Maturity of 30 days or 90 days, respectively). If by 3:00 P.M., New York City
time, on the related Calculation Date such rate is not yet published in either
H.15(519) or Composite Quotations, then the Commercial Paper Rate for such
Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York selected by the Calculation Agent for
commercial paper having the Index Maturity designated in the applicable Pricing
Supplement placed for an industrial issuer whose bond rating is "AA", or the
equivalent, from a nationally recognized securities rating agency; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Commercial Paper Rate determined on
such Commercial Paper Rate Interest Determination Date will be the rate in
effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
S-9
<PAGE>
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the interest period for which interest is being
calculated.
Eleventh District Cost of Funds Rate. Eleventh District Cost of Funds Rate
Notes will bear interest at the rates (calculated with reference to the
Eleventh District Cost of Funds Rate and the Spread and/or Spread Multiplier,
if any) specified in such Eleventh District Cost of Funds Rate Notes and in any
applicable Pricing Supplement.
"Eleventh District Cost of Funds Rate" means, with respect to any Interest
Determination Date relating to an Eleventh District Cost of Funds Rate Note or
any Floating Rate Note for which the interest rate is determined with reference
to the Eleventh District Cost of Funds Rate (an "Eleventh District Cost of
Funds Rate Interest Determination Date"), the rate equal to the monthly
weighted average cost of funds for the calendar month preceding such Eleventh
District Cost of Funds Rate Interest Determination Date as set forth under the
caption "11th District" on Telerate Page 7058 as of 11:00 A.M., San Francisco
time, on such Eleventh District Cost of Funds Rate Interest Determination Date.
If such rate does not appear on Telerate Page 7058 on any related Eleventh
District Cost of Funds Rate Interest Determination Date, the Eleventh District
Cost of Funds for such Eleventh District Cost of Funds Rate Interest
Determination Date shall be the monthly weighted average cost of funds paid by
member institutions of the Eleventh Federal Home Loan Bank District that was
most recently announced (the "Index") by the FHLB of San Francisco as such cost
of funds for the calendar month preceding the date of such announcement. If the
FHLB of San Francisco fails to announce such rate for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, then the Eleventh District Cost of Funds Rate for such
Eleventh District Cost of Funds Rate Interest Determination Date will be the
Eleventh District Cost of Funds Rate in effect on such Eleventh District Cost
of Funds Rate Interest Determination Date.
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the rates
(calculated with reference to the Federal Funds Rate and the Spread and/or
Spread Multiplier, if any) specified in such Federal Funds Rate Notes and in
any applicable Pricing Supplement.
"Federal Funds Rate" means, with respect to any Interest Determination Date
relating to a Federal Funds Rate Note or any Floating Rate Note for which the
interest rate is determined with reference to the Federal Funds Rate (a
"Federal Funds Rate Interest Determination Date"), the rate on such date for
Federal Funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, the Federal Funds Rate for such Federal Funds Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be the arithmetic mean of the rates for the last transaction in overnight
United States dollar federal funds arranged by three leading brokers of federal
funds transactions in The City of New York selected by the Calculation Agent
prior to 9:00 A.M., New York City time on such Federal Funds Rate Interest
Determination Date; provided, however, that if the brokers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate with respect to such Federal Funds Rate Interest Determination Date
will be the Federal Funds Rate in effect on such Federal Funds Rate Interest
Determination Date.
LIBOR. LIBOR Notes will bear interest at the rates (calculated with reference
to LIBOR and the Spread and/or Spread Multiplier, if any) specified in such
LIBOR Notes and in any applicable Pricing Supplement.
"LIBOR" means the rate determined by the Calculation Agent in accordance with
the following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Floating Rate Note for which the interest rate is determined
with reference to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will
be either: (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered rates (unless the specified
Designated LIBOR
S-10
<PAGE>
Page (as defined below) by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the Index
Currency (as defined below) having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following that LIBOR Interest Determination Date, that appear
on the Designated LIBOR Page specified in the applicable Pricing Supplement
as of 11:00 A.M., London time, on that LIBOR Interest Determination Date,
if at least two such offered rates appear (unless, as aforesaid, only a
single rate is required) on such Designated LIBOR Page, or (b) if "LIBOR
Telerate" is specified in the applicable Pricing Supplement, the rate for
deposits in the Index Currency having the Index Maturity designated in the
applicable Pricing Supplement commencing on the second London Business Day
immediately following that LIBOR Interest Determination Date that appears
on the Designated LIBOR Page specified in the applicable Pricing Supplement
as of 11:00 A.M., London time, on that LIBOR Interest Determination Date.
If fewer than two offered rates appear, or no rate appears, as applicable,
LIBOR in respect of the related LIBOR Interest Determination Date will be
determined as if the parties had specified the rate described in clause
(ii) below.
(ii) 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, on
the applicable Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks in the London interbank market, as selected by the
Calculation Agent, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity designated in the applicable Pricing Supplement, commencing on the
second London Business Day immediately following such LIBOR Interest
Determination Date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such LIBOR Interest Determination
Date and in a principal amount that is representative for a single
transaction in such Index Currency in such market at such time. If at least
two such quotations are provided, LIBOR determined on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, LIBOR determined on such LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M. (or such other time specified in the applicable
Pricing Supplement), in the applicable Principal Financial Center(s) (as
defined below), on such LIBOR 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 Index
Maturity designated in the applicable Pricing Supplement and in a principal
amount that is representative for a single transaction in such Index
Currency in such market at such time; provided, however, that if the banks
so selected by the Calculation Agent are not quoting as mentioned in this
sentence, LIBOR determined on such LIBOR Interest Determination Date will
be LIBOR in effect on such LIBOR 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 U.S. 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 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 (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 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 U.S. dollar is the Index Currency, Page 3750) had
been specified.
S-11
<PAGE>
"Principal Financial Center" will be, unless otherwise specified in the
applicable Pricing Supplement, the following city or cities for the related
Index Currency:
<TABLE>
<CAPTION>
PRINCIPAL FINANCIAL
INDEX CURRENCY CENTER(S)
-------------- -------------------
<S> <C>
Australian Dollar............................... Sydney
Belgian Franc................................... Brussels
Canadian Dollar................................. Toronto
Danish Krone.................................... Copenhagen
Dutch Guilder................................... Amsterdam
Finnish Markka.................................. Helsinki
French Franc.................................... Paris
Hong Kong Dollar................................ Hong Kong
Italian Lira.................................... Milan
Luxembourg Franc................................ Brussels and Luxembourg
New Zealand Dollar.............................. Wellington and Auckland
Norwegian Krone................................. Oslo
Spanish Peseta.................................. Madrid
Sterling........................................ London
Swedish Krona................................... Stockholm
Swiss Franc..................................... Zurich
U.S. Dollar..................................... New York
Yen............................................. Tokyo
</TABLE>
Prime Rate. Prime Rate Notes will bear interest at the rates (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any)
specified in such Prime Rate Notes and any applicable Pricing Supplement.
"Prime Rate" means the rate determined by the Calculation Agent in accordance
with the provisions set out in clause (i) or in clause (ii) below, depending
upon whether such rate is specified as "Prime Rate--Major Banks" or as "Prime
Rate--H.15" in the applicable Pricing Supplement:
(i) If the applicable Pricing Supplement indicates that the applicable
rate is "Prime Rate--Major Banks": "Prime Rate" means, with respect to any
Interest Determination Date relating to a Prime Rate Note or any Floating
Rate Note for which the interest rate is determined with reference to the
Prime Rate (a "Prime Rate Interest Determination Date"), the arithmetic
mean of the prime rates of interest publicly announced by three major banks
in The City of New York as its United States dollar prime rate or base
lending rate as in effect for that day. Each change in the prime rate or
base lending rate of any bank so announced by such bank will be effective
as of the effective date of the announcement or, if no effective date is
specified, as of the date of the announcement. If fewer than three such
quotations are provided, the Prime Rate will be calculated by the
Calculation Agent and will be determined as the arithmetic mean on the
basis of the prime rates quoted in The City of New York by three substitute
banks or trust companies organized and doing business under the laws of the
United States, or any state thereof, each having total equity capital of at
least $500 million and being subject to supervision or examination by a
federal or state authority, selected by the Calculation Agent to quote such
rate or rates; provided, however, that if the banks or trust companies so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, the Prime Rate with respect to such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate
Interest Determination Date.
(ii) If the applicable Pricing Supplement indicates that the applicable
rate is "Prime Rate--H.15": "Prime Rate" means, with respect to any Prime
Rate Interest Determination Date, the rate on such date as such rate is
published in H.15(519) under the heading "Bank Prime Loan". If such rate is
not published prior to 3:00 P.M., New York City time, on the related
Calculation Date, then the Prime Rate
S-12
<PAGE>
shall be the arithmetic mean of the rates of interest publicly announced by
each bank that appears on the Reuters Screen NYMF Page as such bank's prime
rate or base lending rate as in effect for that Prime Rate Interest
Determination Date. If fewer than four such rates but more than one such
rate appear on the Reuters Screen NYMF Page for such Prime Rate Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the
prime rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Prime Rate
Interest Determination Date by four major money center banks in The City of
New York selected by the Calculation Agent. If fewer than two such rates
appear on the Reuters Screen NYMF Page, the Prime Rate will be determined
by the Calculation Agent on the basis of the rates furnished in The City of
New York by three substitute banks or trust companies organized and doing
business under the laws of the United States, or any state thereof, having
total equity capital of at least $500 million and being subject to
supervision or examination by Federal or state authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if
the banks or trust companies selected as aforesaid are not quoting as
mentioned in this sentence, the Prime Rate for such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate
Interest Determination Date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on
that service for the purpose of displaying prime rates or base lending rates of
major United States banks.
Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to the Treasury Rate and the Spread and/or Spread
Multiplier, if any) specified in such Treasury Rate Notes and in any applicable
Pricing Supplement.
"Treasury Rate" means, with respect to an Interest Determination Date
relating to a Treasury Rate Note or any Floating Rate Note for which the
interest rate is determined by reference to the Treasury Rate (a "Treasury Rate
Interest Determination Date"), the rate applicable to the most recent auction
of direct obligations of the United States ("Treasury Bills") having the Index
Maturity specified in the applicable Pricing Supplement, as such rate is
published in H.15(519) under the heading "Treasury Bills-auction average
(investment)" or, if not published by 3:00 P.M., New York City time, on the
related 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) as otherwise announced by the United States
Department of the Treasury. In the event that the results of the auction of
Treasury Bills having the Index Maturity designated in the applicable Pricing
Supplement are not reported as provided by 3:00 P.M., New York City time, on
such Calculation Date, or if no such auction is held in a particular week, then
the Treasury Rate 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
City time, on such Treasury Rate Interest Determination Date, of three leading
primary United States government securities dealers (which may include the
Agent) selected by the Calculation Agent, for the issue of Treasury Bills with
a remaining maturity closest to the Index Maturity designated in the applicable
Pricing Supplement; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Treasury
Rate with respect to such Treasury Rate Interest Determination Date will be the
Treasury Rate in effect on such Treasury Rate Interest Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to an issue of Notes, including the determination
of one or more Interest Rate Bases, the specification of one or more Interest
Rate Bases, calculation of the interest rate applicable to a Floating Rate
Note, its Interest Payment Dates or any other matter relating thereto may be
modified by the terms as specified under "Other Provisions" on the face thereof
or in an Addendum relating thereto, if so specified on the face thereof and in
the applicable Pricing Supplement.
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<PAGE>
ORIGINAL ISSUE DISCOUNT NOTES
Notes may be issued at a price less than their redemption price at Maturity,
resulting in such Notes being treated as if they were issued with original
issue discount for federal income tax purposes ("Original Issue Discount
Notes"). Such Original Issue Discount Notes may currently pay no interest or
interest at a rate which at the time of issuance is below market rates. Certain
additional considerations relating to any Original Issue Discount Notes may be
described in the Pricing Supplement relating thereto.
INDEXED NOTES
Notes also may be issued with the principal amount payable at Maturity and/or
interest to be paid thereon to be determined with reference to the price or
prices of specified commodities or stocks, the exchange rate of one or more
specified currencies (including a composite currency such as the European
Currency Unit) relative to an indexed currency, or such other price or exchange
rate as may be specified in such Note ("Indexed Notes"), as set forth in the
applicable Pricing Supplement. Holders of such Notes may receive a principal
amount at Maturity that is greater than or less than the face amount of the
Notes depending upon the relative value at Maturity of the specified indexed
item. Information as to the method for determining the principal amount payable
at Maturity, certain historical information with respect to the specified
indexed item and tax considerations associated with investment in Indexed Notes
will be set forth in the applicable Pricing Supplement.
An investment in Notes indexed, as to principal or interest or both, to one
or more values of currencies (including exchange rates between currencies),
commodities or interest rate indices entails significant risks that are not
associated with similar investments in a conventional fixed-rate debt security.
If the interest rate of such a Note is so indexed, it may result in an interest
rate that is less than that payable on a conventional fixed-rate debt security
issued at the same time, including the possibility that no interest will be
paid, and, if the principal amount of such a Note is so indexed, the principal
amount payable at Maturity may be less than the original purchase price of such
Note if allowed pursuant to the terms of such Note, including the possibility
that no principal will be paid. The secondary market for such Notes will be
affected by a number of factors, independent of the creditworthiness of the
Company and the value of the applicable currency, commodity or interest rate
index, including the volatility of the applicable currency, commodity or
interest rate index, the time remaining to the maturity of such Notes, the
amount outstanding of such Notes and market interest rates. The value of the
applicable currency, commodity or interest rate index depends on a number of
interrelated factors, including economic, financial and political events, over
which the Company has no control. Additionally, if the formula used to
determine the principal amount or interest payable with respect to such Notes
contains a multiple or leverage factor, the effect of any change in the
applicable currency, commodity or interest rate index may be increased. The
historical experience of the relevant currencies, commodities or interest rate
indices should not be taken as an indication of future performance of such
currencies, commodities or interest rate indices during the term of any Note.
Accordingly, prospective investors should consult their own financial and legal
advisors as to the risks entailed by an investment in such Notes and the
suitability of such Notes in light of their particular circumstances.
AMORTIZING NOTES
The Company may from time to time offer Amortizing Notes. Unless otherwise
specified in the applicable Pricing Supplement, interest on each Amortizing
Note will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to Amortizing Notes will be applied first to interest due
and payable thereon and then to the reduction of the unpaid principal amount
thereof. Further information concerning additional terms and conditions of any
issue of Amortizing Notes will be provided in the applicable Pricing
Supplement. A table setting forth repayment information in respect of each
Amortizing Note will be included in the applicable Pricing Supplement and set
forth on such Notes.
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BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes having the same Original Issue Date,
Maturity and otherwise having identical terms and provisions will be
represented by one or more fully registered global Notes (the "Global Notes").
Each such Global Note 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. Unless and until it is exchanged in whole or
in part for Notes in definitive form, no Global Note may be transferred except
as a whole by the Depository to a nominee of such Depository or by a nominee of
such Depository to such Depository or another nominee of such Depository or by
such Depository or any such nominee to a successor of such Depository or a
nominee of such successor.
The Depository has advised the Company as follows: the Depository is a
limited-purpose trust company organized under the Banking Law 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 pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. The Depository was created to hold securities
of its participants ("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
Depository's Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations, including
the Agent. The Depository is owned by a number of Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the Depository's book-entry
system is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Purchases of Book-Entry Notes must be made by or through Participants, which
will receive a credit on the records of the Depository. The ownership interest
of each actual purchaser of each Book-Entry Note (the "Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Depository of
their purchase, but Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Ownership of
beneficial interests in Global Notes will be shown on, and the transfer of such
ownership interests will be effected only through, records maintained by the
Depository (with respect to interests of Participants) and on the records of
Participants (with respect to interests of persons held through Participants).
The laws of some states may 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 own, transfer or pledge beneficial interests in
Global Notes.
So long as the Depository, or its nominee, is the registered owner of a
Global Note, the Depository or its nominee, as the case may be, will be
considered the sole owner or Holder of the Notes represented by such Global
Note for all purposes under the Senior Indenture. Except as provided below,
Beneficial Owners of a Global Note will not be entitled to have the Notes
represented by such Global Note registered in their names, will not receive or
be entitled to receive physical delivery of the Notes in definitive form and
will not be considered the owners or Holders thereof under the Chase Indenture.
Accordingly, each person owning a beneficial interest in a Global Note must
rely on the procedures of the Depository 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 Chase
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 Chase Indenture, the
Depository 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.
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Conveyance of notices and other communications by the Depository to
Participants, by Participants to Indirect Participants, and by Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Payment of principal of, and interest on, Notes registered in the name of the
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the Holder of the Global Note or Global Notes representing such
Notes. None of the Company, the Trustee or any other agent of the Company or
agent of the Trustee will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial ownership
interests or for supervising or reviewing any records relating to such
beneficial ownership interests. The Company expects that the Depository, upon
receipt of any payment of principal or interest in respect of a Global Note,
will credit the accounts of the Participants with payment in amounts
proportionate to their respective holdings in principal amount of beneficial
interest in such Global Note as shown on the records of the Depository. The
Company also expects that payments by Participants to Beneficial Owners will be
governed by standing customer instructions and customary practices, as is now
the case with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
Participants.
If (x) the Depository is at any time unwilling or unable to continue as
Depository and a successor depository is not appointed by the Company within 60
days, or (y) the Company executes and delivers to the Trustee a Company Order
to the effect that the Global Notes shall be exchangeable, or (z) an Event of
Default has occurred and is continuing with respect to the Notes, the Global
Note or Global Notes will be exchangeable for Notes in definitive form of like
tenor and of an equal aggregate principal amount, in denominations of $1,000
and integral multiples thereof. Such definitive Notes shall be registered in
such name or names as the Depository shall instruct the Trustee. It is expected
that such instructions may be based upon directions received by the Depository
from Participants with respect to ownership of beneficial interests in Global
Notes.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes 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. It 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 (except where otherwise specifically
noted). 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 beneficial owner of a Note that is not a U.S. Holder.
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U.S. HOLDERS
Payments of Interest. Payments of interest on a Note generally will be
taxable to a U.S. Holder as ordinary interest income at the time such payments
are accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting).
Original Issue Discount. The following summary is a general discussion of the
United States Federal income tax consequences to U.S. Holders of the purchase,
ownership and disposition of Notes issued with original issue discount
("Discount Notes"). The following summary is based upon final Treasury
regulations (the "OID Regulations") released by the Internal Revenue Service
("IRS") on January 27, 1994 under the original issue discount provisions of the
Internal Revenue Code of 1986, as amended (the "Code").
For United States Federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds 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 its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as defined below) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note of an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note 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. In
addition, under the OID Regulations, if a Note bears 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 teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then the
stated interest on the Note would be treated as original issue discount rather
than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of a Discount Note must include original issue
discount in income as ordinary interest for United States Federal income tax
purposes as it accrues under a constant yield method 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 included in income by the initial U.S. Holder of a Discount Note is
the sum of the daily portions of original issue discount with respect to such
Discount Note for each day during the taxable year (or portion of the taxable
year) on which such U.S. Holder held such Discount Note. The "daily portion" of
original issue discount on any Discount Note is 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 Discount 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 is generally equal to the difference
between (i) the product of the Discount 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) and
(ii) the amount of any qualified stated interest payments allocable to such
accrual period. The "adjusted issue price" of a Discount Note at the beginning
of any accrual period is the sum of the issue price of the Discount Note plus
the amount of original issue discount allocable to all prior accrual periods
minus the amount of any prior payments on the Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
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A U.S. Holder who purchases a Discount Note for an amount that is greater
than its adjusted issue price as of the purchase date and less than or equal to
the sum of all amounts payable on the Discount Note after the purchase date
other than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such Discount Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes (hereinafter
"Variable Notes") are subject to special rules whereby a Variable Note will
qualify as a "variable rate debt instrument" if (a) its issue price does not
exceed the total noncontingent principal payments due under the Variable Note
by more than a specified de minimis amount and (b) it provides for stated
interest, paid or compounded at least annually, at current values of (i) one or
more qualified floating rates, (ii) a single fixed rate and one or more
qualified floating rates, (iii) a single objective rate, or (iv) a single fixed
rate and a single objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than zero but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than zero but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a maximum numerical limitation (i.e., a cap) or a minimum numerical
limitation (i.e., a floor) may, under certain circumstances, fail to be treated
as a qualified floating rate under the OID Regulations unless such cap or floor
is fixed throughout the term of the Note. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and which is based upon (i) one or more qualified floating rates,
(ii) one or more rates where each rate would be a qualified floating rate for a
debt instrument denominated in a currency other than the currency in which the
Variable Note is denominated, (iii) either the yield or changes in the price of
one or more items of actively traded personal property (other than stock or
debt of the issuer or a related party) or (iv) a combination of objective
rates. The OID Regulations also provide that other variable interest rates may
be treated as objective rates if so designated by the IRS in the future.
Despite the foregoing, a variable rate of interest on a Variable Note will not
constitute an objective rate if it is reasonably expected that the average
value of such rate during the first half of the Variable Note's term will be
either significantly less than or significantly greater than the average value
of the rate during the final half of the Variable Note's term. A "qualified
inverse floating rate" is any objective rate where such rate is equal to a
fixed rate minus a qualified floating rate, as long as variations in the rate
can reasonably be expected to inversely reflect contemporaneous variations in
the cost of newly borrowed funds. The OID Regulations also provide that if a
Variable Note provides for stated interest at a fixed rate for an initial
period of less than one year followed by a variable rate that is either a
qualified floating rate or an objective rate and if the variable rate on the
Variable Note's issue date is intended to approximate the fixed rate (e.g., the
value of the variable rate on the issue date does not differ from the value of
the fixed rate by more than 25 basis points), then the fixed rate and the
variable rate together will constitute either a single qualified floating rate
or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other
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than debt instruments of the issuer) at least annually will constitute
qualified stated interest and will be taxed accordingly. Thus, a Variable Note
that provides for stated interest at either a single qualified floating rate or
a single objective rate throughout the term thereof and that qualifies as a
"variable rate debt instrument" under the OID Regulations will generally not be
treated as having been issued with original issue discount unless the Variable
Note is issued at a "true" discount (i.e., at a price below the Note's stated
principal amount) in excess of a specified de minimis amount. Original issue
discount on such a Variable Note arising from "true" discount is allocated to
an accrual period using the constant yield method described above by assuming
that the variable rate is a fixed rate equal to (i) in the case of a qualified
floating rate or qualified inverse floating rate, the value as of the issue
date, of the qualified floating rate or qualified inverse floating rate, or
(ii) in the case of an objective rate (other than a qualified inverse floating
rate), a fixed rate that reflects the yield that is reasonably expected for the
Variable Note.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable Note.
In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Note as of the Variable
Note's issue date is approximately the same as the fair market value of an
otherwise identical debt instrument that provides for either the qualified
floating rate or qualified inverse floating rate rather than the fixed rate.
Subsequent to converting the fixed rate into either a qualified floating rate
or a qualified inverse floating rate, the Variable Note is then converted into
an "equivalent" fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and
qualified stated interest as if the U.S. Holder held the "equivalent" fixed
rate debt instrument. Each accrual period appropriate adjustments will be made
to the amount of qualified stated interest or original issue discount assumed
to have been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
U.S. Holders should be aware that on December 15, 1994, the IRS released
proposed amendments to the OID Regulations which would broaden the definition
of an objective rate and would further clarify certain other provisions
contained in the OID Regulations. If ultimately adopted, these amendments to
the OID Regulations generally would be effective for debt instruments issued 60
days or more after the date on which such proposed amendments are finalized.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. The proper United States Federal income tax treatment
of Variable Notes that are treated as contingent payment debt obligations will
be more fully described in the applicable Pricing Supplement. Furthermore, any
other special United States Federal income tax considerations, not otherwise
discussed
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herein, which are applicable to any particular issue of Notes will be discussed
in the applicable Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company prior
to their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including 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) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Foreign-Currency Notes. The United States Federal income tax consequences of
the purchase, ownership and disposition of Notes providing for payments
denominated in a currency other than U.S. dollars will be more fully described
in the applicable Pricing Supplement.
Short-Term Notes. Notes that have a fixed maturity of one year or less
("Short-Term Notes") will be treated as having been issued with original issue
discount. In general, an individual or other cash method U.S. Holder is not
required to accrue such original issue discount unless the U.S. Holder elects
to do so. If such an election is not made, any gain recognized by the U.S.
Holder on the sale, exchange or maturity of the Short-Term Note will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based on
daily compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States Federal
income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original
issue discount on a Short-Term Note on a straight-line basis unless an election
is made to accrue the original issue discount under a constant yield method
(based on daily compounding).
Market Discount. If a U.S. Holder purchases a Note, other than a Discount
Note, for an amount that is less than its issue price (or, in the case of a
subsequent purchaser, its stated redemption price at maturity) or, in the case
of a Discount Note, for an amount that is less than its adjusted issue price as
of the purchase date, such U.S. Holder will be treated as having purchased such
Note at a "market discount," unless such market discount is less than a
specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Discount Note, any payment that
does not constitute qualified stated interest) on, or any gain realized on the
sale, exchange, retirement or other disposition of, a Note as ordinary income
to the extent of the lesser of (i) the amount of such payment or realized gain
or (ii) the market discount which has not previously been included in income
and is treated as having accrued on such Note at the time of such payment or
disposition. Market discount will be considered to accrue ratably during the
period from the date of acquisition to the maturity date of the Note, unless
the U.S. Holder elects to accrue market discount on the basis of semiannual
compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to
the extent the interest expense exceeds an allocable portion of market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding basis),
in
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which case the rules described above regarding the treatment as ordinary income
of gain upon the disposition of the Note and upon the receipt of certain cash
payments and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the taxable year to which such election applies and may be revoked only
with the consent of the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater than
the sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess
of its stated redemption price at maturity, special rules would apply which
could result in a deferral of the amortization of some bond premium until later
in the term of the Note. Any election to amortize bond premium applies to all
taxable debt obligations then owned and thereafter acquired by the U.S. Holder
and may be revoked only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) 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 (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. Such gain or loss generally will be long-term
capital gain or loss if the Note were held for more than one year.
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, if any) 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.
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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.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis for sale by the Company,
through the Agent, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, who will purchase the Notes, as principal, from the Company, for
resale to investors and other purchasers at varying prices relating to
prevailing market prices at the time of resale as determined by the Agent, or,
if so specified in an applicable Pricing Supplement, for resale at a fixed
public offering price. Unless otherwise specified in an applicable Pricing
Supplement, any Note sold to the Agent as principal will be purchased by the
Agent at a price equal to 100% of the principal amount thereof less a
percentage of the principal amount equal to the commission applicable to an
agency sale (as described below) of a Note of identical maturity. If agreed to
by the Company and the Agent, the Agent may utilize their reasonable efforts on
an agency basis to solicit offers to purchase the Notes at 100% of the
principal amount thereof, unless otherwise specified in an applicable Pricing
Supplement. The Company will pay a commission to the Agent, ranging from .125%
to .750% of the principal amount of a Note, depending upon its Stated Maturity
(or, with respect to Notes for which the Stated Maturity is in excess of 30
years, such commission as shall be agreed upon by the Company and the related
Agent at the time of sale), sold through the Agent.
The Agent may sell Notes it has purchased from the Company as principal to
other dealers for resale to investors, and may allow any portion of the
discount received in connection with such purchases from the Company to such
dealers. After the initial public offering of Notes, the public offering price
(in the case of Notes to be resold at a fixed public offering price), the
concession and the discount allowed to dealers may be changed.
S-22
<PAGE>
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject orders in whole or in part whether placed
directly with the Company or through the Agent. The Agent will have the right,
in their discretion reasonably exercised, to reject in whole or in part any
offer to purchase Notes received by the Agent.
Unless otherwise specified in an applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in New York City of the date of settlement.
No Note will have an established trading market when issued. Unless specified
in the applicable pricing supplement, the Notes will not be listed on any
securities exchange. The Agent may from time to time purchase and sell Notes in
the secondary market, but the Agent is not obligated to do so, and there can be
no assurance that there will be a secondary market for the Notes or liquidity
in the secondary market if one develops. From time to time, the Agent may make
a market in the Notes.
The Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Act"). The Company has agreed to
indemnify the Agent against or to make contributions relating to certain civil
liabilities, including liabilities under the Act, or to contribute to payments
the Agent may be required to make in respect thereof. The Company has agreed to
reimburse the Agent for certain expenses.
LEGAL OPINION
The validity of the Notes will be passed upon for the Company and the Agent
by Brown & Wood, New York, New York.
S-23
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUBJECT TO COMPLETION, ISSUE DATE: AUGUST 22, 1995
LOGO
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES
Merrill Lynch & Co., Inc. (the "Company") has issued Medium-Term Notes with
original maturities from and exceeding 9 months from date of issue (the
"Notes") pursuant to an indenture, dated as of April 1, 1983, as amended and
restated, between the Company and The Chase Manhattan Bank (National
Association) (successor to Manufacturers Hanover Trust Company). The Notes bear
interest at fixed or variable rates, or were sold at a discount and do not bear
interest. The descriptions of the interest rates on Fixed Rate Notes, the
method of determining the interest rates on Floating Rate Notes, the issue
prices of Zero Coupon Notes, the currencies (if other than U.S. dollars) in
which Notes were denominated and the dates of maturity and other terms related
to specific issues of Notes are set forth in Pricing Supplements relating to
each such issue of Notes that were previously filed by the Company with the
Securities and Exchange Commission pursuant to regulations promulgated under
the Securities Act of 1933. Such Pricing Supplements are hereby incorporated by
reference into this Prospectus and are available at the reference facilities
maintained by the Securities and Exchange Commission specified in the section
entitled "Available Information" contained in this Prospectus. The Notes had
original maturities from and exceeding 9 months from their respective dates of
original issue. The Notes were issued in the form of a certificate issued in
definitive form.
Floating Rate Notes and Zero Coupon Notes are issued in denominations of
$25,000 or any amount in excess thereof which is an integral multiple of
$1,000. Fixed Rate Notes are issued in denominations of $1,000 or any integral
multiple in excess thereof.
Unless otherwise specified in the applicable Pricing Supplement, interest on
Fixed Rate Notes will be payable semi-annually on each May 15 and November 15
and at maturity or, if applicable, upon redemption or optional repayment. The
interest rate on Floating Rate Notes will be determined by reference to a
specified interest rate formula, and may be adjusted by a "Spread" or "Spread
Multiplier", as defined herein. Interest on each Floating Rate Note will be
payable monthly, quarterly, semi-annually or annually, as set forth in the
applicable Pricing Supplement, and at maturity or, if applicable, upon
redemption or optional repayment. On and after the Redemption Date, if any, set
forth in the applicable Pricing Supplement, a Note will be subject to
redemption by the Company, in whole or in part, at 100% of the principal amount
to be redeemed, together with interest to the date of redemption. On any
Optional Repayment Date set forth in the applicable Pricing Supplement, a Note
will be subject to repayment at the option of the Holder, in whole or in part,
at 100% of the principal amount to be repaid, together with interest to the
date of repayment. (See "Description of Notes" in this Prospectus.)
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS OR ANY SUPPLEMENT HERETO. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
This Prospectus has been prepared in connection with the Notes and is to be
used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), a wholly owned subsidiary of the Company, in connection with offers
and sales related to market-making transactions in the Notes. MLPF&S may act as
principal or agent in such transactions. Sales will be made at prices related
to prevailing prices at the time of sale. The distribution of the Notes will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
-----------
MERRILL LYNCH & CO.
-----------
The date of this Prospectus is , 1995.
<PAGE>
The Commissioner of Insurance of the State of North Carolina has not approved
or disapproved this offering nor has the Commissioner passed upon the accuracy
or adequacy of this Prospectus Supplement or Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports, proxy and
information statements and other information concerning the Company may also be
inspected at the offices of the New York Stock Exchange, the American Stock
Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995 and
June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995, January
23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March 9, 1995,
April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21, 1995, August
1, 1995, and August 2, 1995 filed pursuant to Section 13 of the Exchange Act,
are hereby incorporated by reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the maturity of the Notes shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
(WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE)
OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T. RUSSO, SECRETARY,
MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR, NEW YORK, NEW YORK
10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO, OR A SOLICITATION OF AN OFFER TO BUY FROM, ANY PERSON
IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its subsidiaries
and affiliates, provides investment, financing, insurance, and related services
on a global basis. Its principal subsidiary, MLPF&S, one of the largest
securities firms in the world, is a leading broker in securities, options
contracts, and commodity and financial futures contracts; a leading dealer in
options and in corporate and municipal securities; a leading investment banking
firm that provides advice to, and raises capital for, its clients; and an
underwriter of selected insurance products. Other subsidiaries provide
financial services on a global basis similar to those of MLPF&S and are engaged
in such other activities as international banking, lending, and providing other
investment and financing services. Merrill Lynch International Incorporated,
through subsidiaries and affiliates, provides investment, financing, and
related services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by the
U.S. Government and by Federal agencies or instrumentalities. Merrill Lynch
Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and Merrill
Lynch Capital Markets PLC are the Company's primary derivative product dealers
and enter into interest rate and currency swaps and other derivative
transactions as intermediaries and as principals. Merrill Lynch Asset
Management, L.P., with its related affiliates, is one of the largest mutual
fund managers in the world and provides investment advisory services. The
Company's insurance underwriting operations consist of the underwriting of life
insurance and annuity products. Banking, trust, and mortgage lending operations
conducted through subsidiaries of the Company include issuing certificates of
deposit, offering money market deposit accounts, making secured loans, and
providing foreign exchange facilities and other related services.
The principal executive office of the Company is located at World Financial
Center, North Tower, 250 Vesey Street, New York, New York 10281; its telephone
number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY
IN DECEMBER SIX MONTHS
------------------------ ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges....... 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income taxes
and fixed charges. "Fixed charges" consists of interest costs, amortization of
debt expense, preferred stock dividend requirements of majority-owned
subsidiaries, and that portion of rentals estimated to be representative of the
interest factor.
DESCRIPTION OF NOTES
GENERAL
"Pricing Supplement", as used herein, means a prospectus supplement relating
to an individual issue of the Notes, as filed with the Securities and Exchange
Commission. Such Pricing Supplements are hereby incorporated by reference into
this Prospectus and are available at the reference facilities maintained by the
Securities and Exchange Commission specified in the section entitled "Available
Information" in this Prospectus.
The terms and conditions set forth below apply to each Note unless otherwise
specified in the applicable Pricing Supplement.
3
<PAGE>
Except as provided in the applicable Pricing Supplement, the Notes are
denominated in U.S. dollars. If provided in the applicable Pricing Supplement,
Notes are denominated in a foreign currency or in units of two or more
currencies ("Multi-Currency Notes").
Except as provided in the applicable Pricing Supplement, (i) the Notes are
issued only in fully registered form without coupons, (ii) Floating Rate Notes
and Zero Coupon Notes are issued in denominations of $25,000 or any amount in
excess thereof which is an integral multiple of $1,000, and (iii) Fixed Rate
Notes were issued in denominations of $1,000 or any integral multiple in excess
thereof.
Unless otherwise specified in the applicable Pricing Supplement, principal
and interest, if any, will be payable, the transfer of the Notes will be
registrable, and Notes will be exchangeable for Notes bearing identical terms
and provisions at the office of the Trustee in The City of New York designated
for such purpose, provided that payment of interest, other than interest
payable at maturity (or on any date of redemption or repayment), may be made at
the option of the Company by check mailed to the address of the person entitled
thereto as shown on the Security Register. The principal and interest payable
at maturity or the date of redemption or repayment on each Note will be paid
upon maturity, redemption or repayment, as the case may be, in immediately
available funds against presentation of the Note at the office of the Trustee
maintained for such purpose.
Notwithstanding the above, however, payment of interest on a Note which bears
interest at a floating rate (a "Floating Rate Note") at maturity or earlier
redemption or repayment may be made by wire transfer of immediately available
funds to a designated account maintained in the United States upon (i) receipt
of written notice by the Senior Debt Trustee from the Holder thereof not less
than one Business Day prior to the due date of such principal payment and (ii)
presentation of such Note at the Corporate Trust Office of the Senior Debt
Trustee in the Borough of Manhattan, The City of New York (the "Corporate Trust
Office"), or at such other place as the Company may designate. A Holder of not
less than $1,000,000 aggregate principal amount of Floating Rate Notes may by
written notice to the Senior Debt Trustee at the Corporate Trust Office (or at
such other address as the Company will give notice in writing) not less than 15
days prior to an Interest Payment Date, arrange to have the interest payable on
all Notes held by such Holder on such Interest Payment Date, and all subsequent
Interest Payment Dates until written notice to the contrary is given to the
Senior Debt Trustee, made by wire transfer of immediately available funds to a
designated account maintained in the United States.
Except as provided in the applicable Pricing Supplement, "Business Day" means
any day that is not a Saturday or Sunday and that, in The City of New York, is
neither a legal holiday nor a day on which banking institutions are authorized
or obligated by law or regulation to close.
REPAYMENT AT OPTION OF HOLDER
If so indicated in an applicable Pricing Supplement, Notes will be repayable
by the Company in whole or in part at the option of the Holders thereof on
their respective Optional Repayment Dates specified in such Pricing Supplement.
If no Optional Repayment Date is indicated with respect to a Note, such Note
will not be repayable at the option of the Holder prior to maturity. Any
repayment in part will be in increments of $1,000 provided that any remaining
principal amount of such Note will be an authorized denomination of such Note.
The repurchase price for any Note so repurchased will be 100% of the principal
amount to be repaid, together with interest thereon payable to the date of
repayment.
Notwithstanding anything to the contrary herein, if repayable at the option
of the Holder, a Note shall be repayable only on an Interest Payment Date, and
if any Optional Repayment Date specified with respect to a Note would not be an
Interest Payment Date (whether because such date is not a Business Day or
otherwise), such Optional Repayment Date shall (instead of being the date so
specified) be the Interest Payment Date nearest such specified Optional
Repayment Date (whether such Interest Payment Date shall precede or succeed
such specified Optional Repayment Date), or, in the event that an equal number
of days
4
<PAGE>
shall separate a specified Optional Repayment Date and the preceding Interest
Payment Date, on the one hand, and the succeeding Interest Payment Date, on the
other hand, such Optional Repayment Date shall be the succeeding Interest
Payment Date.
In order for a Note which is by its terms repayable at the option of the
Holder to be repaid, prior to maturity, the Company must receive at the
Corporate Trust Office of the Senior Debt Trustee (or at such other address of
which the Company will from time to time notify the Holder thereof) during the
period from and including the 20th Business Day preceding the applicable
Optional Repayment Date up to and including the close of business on the 16th
Business Day preceding the applicable Optional Repayment Date: (i) such Note
with the information under the caption "Option to Elect Repayment" duly
completed, or (ii) a telegram, telex, facsimile transmission or letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or a trust company in the United
States of America dated no later than the 16th Business Day preceding the
applicable Optional Repayment Date and setting forth the name of the Holder of
such Note, the principal amount of such Note, the amount of such Note to be
repaid, a statement that the option to elect repayment is being exercised
thereby and a guarantee that such Note (with the information required under the
caption "Option to Elect Repayment" duly completed) will be received at the
above-mentioned office of the Senior Debt Trustee, not later than the 5th
Business Day after the date of such telegram, telex, facsimile transmission or
letter and Note, duly completed, is received at such office of the Trustee by
such 5th Business Day. Effective exercise of the repayment option by the Holder
of a Note will be irrevocable. No transfer or exchange of a Note (or, in the
event that a Note is to be repaid in part, such portion of such Note to be
repaid) will be permitted after exercise of the repayment option. All questions
as to the validity, eligibility (including time of receipt) and acceptance of
any Note for repayment will be determined by the Company, whose determination
will be final, binding and non-appealable. The Company has the right to offer
for resale any Note acquired by it pursuant to the foregoing arrangements.
Accordingly, the indebtedness evidenced by any Note so repurchased by the
Company may not be satisfied by such repurchase.
REDEMPTION AT OPTION OF THE COMPANY
The Notes will not have a sinking fund but will be redeemable at the option
of the Company only if a Redemption Date is specified therein and in the
applicable Pricing Supplement. If so indicated in an applicable Pricing
Supplement, Notes will be subject to redemption by the Company on and after
their respective Redemption Dates specified in such Pricing Supplement. On and
after the Redemption Date, if any, the related Note will be redeemable in whole
or in part in increments of $1,000 (provided that any remaining principal
amount of such Note shall be an authorized denomination of such Note) at the
option of the Company at a redemption price equal to 100% of the principal
amount to be redeemed, together with interest thereon payable to the date of
redemption, on notice given not more than 60 nor less than 30 days prior to the
date of redemption in the case of Fixed Rate Notes, or on notice given not more
than 30 nor less than 15 days prior to the date of redemption in the case of
Floating Rate Notes. Notwithstanding the above, however, Floating Rate Notes,
if redeemable at the option of the Company, will be redeemable only on Interest
Payment Dates occurring on or after the applicable Redemption Dates.
INTEREST RATE
Each Floating Rate Note and Note which bears interest at a fixed rate (a
"Fixed Rate Note") will bear interest at the rate per annum, or pursuant to the
interest rate formula, stated therein and in the applicable Pricing Supplement
until the principal thereof is paid or made available for payment. Interest
will be payable on each Interest Payment Date and at maturity or, if
applicable, upon redemption or repayment. 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; provided,
however, interest payable at maturity or, if applicable, upon redemption or
repayment will be payable to the person to whom principal shall be payable.
Except as provided in the applicable Pricing Supplement, Merrill Lynch, Pierce,
Fenner & Smith Incorporated will be the calculation agent (the "Calculation
Agent") with respect to Floating Rate Notes.
5
<PAGE>
Each Floating Rate Note will bear interest at rates determined by reference
to an interest rate formula, which may be adjusted by a Spread or Spread
Multiplier (each as defined below), unless otherwise specified therein. A
Floating Rate Note may also have either or both of the following: (i) a maximum
limitation, or ceiling, on the rate at which interest which may accrue during
any interest period; and (ii) a minimum limitation, or floor, on the rate at
which interest which may accrue during any interest period. The applicable
Pricing Supplement relating to Fixed Rate Notes or Floating Rate Notes will
designate either a fixed rate of interest per annum payable on the applicable
Note, in which case such Note will be a Fixed Rate Note, or one of the
following Base Rates, as applicable to the relevant Floating Rate Note: (a) the
Commercial Paper Index Rate, in which case such Note will be a Commercial Paper
Index Rate Note, (b) the Federal Funds Rate, in which case such Note will be a
Federal Funds Rate Note, (c) the Prime Rate, in which case such Note will be a
Prime Rate Note, (d) the Treasury Index Rate, in which case such Note will be a
Treasury Index Rate Note, (e) LIBOR, in which case such Note will be a LIBOR
Note, or (f) such other interest rate formula as is set forth in such Pricing
Supplement. Except as specified in the applicable Pricing Supplement, Floating
Rate Notes will have daily, weekly, monthly, quarterly, semiannual or annual
resets of the rate of interest.
FIXED RATE NOTES
Each Fixed Rate Note will bear interest at the rate per annum stated on the
face thereof until the principal thereof is paid or made available for payment.
Except as provided in the applicable Pricing Supplement, interest will be
payable semi-annually on May 15 and November 15 of each year and at maturity
(or on the date of redemption or repayment, if a Fixed Rate Note is redeemed by
the Company or repaid at the Holder's option prior to maturity). Interest will
be computed on the basis of a 360-day year of twelve 30-day months. Interest
will be payable to the person in whose name a Fixed Rate Note is registered at
the close of business on the May 1 or November 1 Regular Record Date next
preceding the May 15 or November 15 Interest Payment Date. Interest rates are
subject to change by the Company from time to time, but no such change will
affect any Fixed Rate Note theretofore issued or as to which an offer to
purchase has been accepted by the Company.
Any payment of principal or interest required to be made on an Interest
Payment Date, at maturity or earlier redemption or repayment of a Fixed Rate
Note which is not a Business Day need not be made on such day, but may be made
on the next succeeding Business Day with the same force and effect as if made
on the Interest Payment Date, maturity date or date of redemption or repayment,
as the case may be, and no interest shall accrue with respect to such payment
for the period from and after such Interest Payment Date, maturity date or date
of redemption or repayment.
FLOATING RATE NOTES
The applicable Pricing Supplement specifies the base rate or other interest
rate formula and the Spread or Spread Multiplier, if any, and the maximum or
minimum interest rate limitation, if any, applicable to each Floating Rate
Note. In addition, such Pricing Supplement specifies for each Floating Rate
Note the following terms, if applicable: the Initial Interest Rate, the
Interest Payment Dates, the Index Maturity, Interest Reset Dates, Optional
Repayment Dates, Redemption Date and any other variable term applicable to such
Note.
The interest rate on each Floating Rate Note will be calculated by reference
to the specified interest rate formula (i) plus or minus the Spread, if any, or
(ii) multiplied by the Spread Multiplier, if any. The "Spread" is the number of
basis points specified in the applicable Pricing Supplement as being applicable
to the interest rate for such Floating Rate Note. The "Spread Multiplier" is
the percentage of the Base Rate applicable to the interest rate for such
Floating Rate Note. "Index Maturity" means, with respect to a Floating Rate
Note, the period to maturity of the instrument or obligation on which the
interest rate formula is based, as specified in the applicable Pricing
Supplement. "Regular Record Date" with respect to Floating Rate Notes means the
15th day (whether or not a Business Day) prior to the applicable Interest
Payment Date. The "Calculation
6
<PAGE>
Date", if applicable, with respect to any Interest Determination Date (as
specified with respect to each Base Rate) will be the earlier of (i) the tenth
calendar day after such Interest Determination Date or, if such day is not a
Business Day, the next succeeding Business Day, or (ii) the Business Day prior
to the Interest Payment Date on which such accrued interest will be payable.
Except as otherwise provided herein with respect to LIBOR Notes or in the
applicable Pricing Supplement, if any Interest Reset Date for any Floating Rate
Note would otherwise be a day that is not a Business Day, such Interest Reset
Date shall be postponed to the next succeeding day that is a Business Day.
Each Floating Rate Note will bear interest from the date of issue at the
rates determined as described below until the principal thereof is paid or
otherwise made available for payment. The rate of interest on a Floating Rate
Note will be reset each Interest Reset Date applicable to such Note; provided,
however, that except in the case of Floating Rate Notes which reset daily, the
interest rate in effect for the ten days immediately prior to maturity,
redemption or repayment, as the case may be, will be that in effect on the
tenth day preceding such maturity, redemption or repayment, as the case may be.
Except as otherwise provided herein or in the applicable Pricing Supplement,
the rate of interest determined on an Interest Reset Date with respect to a
Floating Rate Note will be applicable on and after such Interest Reset Date to,
but not including, the next succeeding Interest Reset Date, or until the date
of maturity or date of redemption or repayment, as the case may be.
If an Interest Payment Date with respect to any Floating Rate Note would
otherwise fall on a day that is not a Business Day with respect to such Note,
such Interest Payment Date will be the following day that is a Business Day,
except that in the case of a LIBOR Note, if such day falls in the next calendar
month, such Interest Payment Date will be the preceding day that is a Business
Day. If the maturity date (or date of redemption or repayment) of any Floating
Rate Note would fall on a day that is not a Business Day, the payment of
interest and principal may be made on the next succeeding Business Day, and no
interest on such payment will accrue for the period from and after the maturity
date (or the date of redemption or repayment).
Except as provided in the applicable Pricing Supplement, interest payments on
Floating Rate Notes shall be the amount of interest accrued from, and
including, the next preceding Interest Payment Date in respect of which
interest has been paid to, but excluding, the Interest Payment Date. With
respect to a Floating Rate Note, accrued interest from the last date to which
interest has been paid is calculated by multiplying the principal amount of
such Floating Rate Note by an accrued interest factor. Such accrued interest
factor is computed by adding the interest factors, calculated for each day,
from the last date to which interest has been paid, to the date for which
accrued interest is being calculated. The interest factor for each such day is
computed by dividing the interest rate applicable to such day by 360, in the
case of Commercial Paper Index Rate Notes, Federal Funds Rate Notes, Prime Rate
Notes and LIBOR Notes, or by the actual number of days in the year, in the case
of Treasury Index Rate Notes.
All percentages resulting from any calculation on Floating Rate Notes will be
rounded, if necessary, to the nearest one hundred-thousandth of a percentage
point, with five one- millionths of a percentage point rounded upward (e.g.,
9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all
dollar amounts used in or resulting from such calculation on Floating Rate
Notes will be rounded to the nearest cent (with one-half cent being rounded
upward).
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 as a result of a determination made
with respect to the most recent Interest Determination Date with respect to
such Floating Rate Note.
COMMERCIAL PAPER INDEX RATE NOTES
Commercial Paper Index Rate Notes will bear interest at the interest rates
(calculated with reference to the Commercial Paper Index Rate and the Spread or
Spread Multiplier, if any) specified in the applicable Pricing Supplement.
7
<PAGE>
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Index Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Index Rate Note, the Money Market Yield
(calculated as described below) of the rate on that date for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement as
such rate is published by the Board of Governors of the Federal Reserve System
in "Statistical Release H.15(519), Selected Interest Rates" or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)"), under the heading "Commercial Paper". In the event that such
rate is not published by 9:00 A.M. New York City time on the Calculation Date
pertaining to such Interest Determination Date, then the Commercial Paper Index
Rate shall be the Money Market Yield of the rate on that Interest Determination
Date for commercial paper having such Index Maturity as 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" ("Composite Quotations")
under the heading "Commercial Paper". If by 3:00 P.M., New York City time, on
such Calculation Date such rate is not yet published in either H.15(519) or
Composite Quotations, the Commercial Paper Index Rate for that Interest
Determination Date shall be calculated by the Calculation Agent and shall be
the Money Market Yield of the arithmetic mean of the offered rates of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent as of 11:00 A.M., New York City time, on that Interest
Determination Date for commercial paper having the specified Index Maturity
placed for an industrial issuer whose bond rating is "AA" or the equivalent
from a nationally recognized rating agency; provided, however, that if the
dealers selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Index Rate will be the
Commercial Paper Index Rate in effect on such Interest Determination Date.
"Money Market Yield" shall be the yield (expressed as a percentage)
calculated in accordance with the following formula:
D X 360
Money Market Yield = ----------- X 100
360-(D X M)
where "D" refers to the per annum rate for commercial paper quoted on a bank
discount basis and expressed as a decimal; and "M" refers to the actual number
of days in the interest period for which interest is being calculated.
The Interest Determination Date pertaining to an Interest Reset Date on a
Commercial Paper Index Rate Note will be the Business Day prior to such
Interest Reset Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rate Notes will bear interest at the interest rates (calculated
with reference to the Federal Funds Rate and the Spread, or Spread Multiplier,
if any) specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to
a Federal Funds Rate Note, the rate on such Interest Determination Date for
Federal Funds as published by the Board of Governors of the Federal Reserve
System in "Statistical Release H.15(519), Selected Interest Rates"
("H.15(519)") or any successor publication under the heading "Federal Funds
(Effective)" or, if not so published by 9:00 A.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, the Federal
Funds Rate will be the interest rate on such Interest Determination Date as
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"
("Composite Quotations") under the heading "Federal Funds/Effective Rate". If
such rate is not yet published by 9:00 A.M. on the Calculation Date pertaining
to such Interest Determination Date, the Federal Funds Rate for such Interest
Determination Date will be the rate on such Interest Determination Date made
publicly available by the Federal Reserve Bank of New York which is equivalent
to the rate which appears in H.15(519) under the heading "Federal Funds
(Effective)"; provided, however, that if such rate is not made
8
<PAGE>
publicly available by the Federal Reserve Bank of New York by 9:00 A.M. on the
Calculation Date, the Federal Funds Rate will be the last Federal Funds Rate in
effect prior to such Interest Determination Date.
The rate of interest on a Federal Funds Rate Note will be reset each Interest
Reset Date applicable to such Note. Unless otherwise specified in the
applicable Pricing Supplement, with respect to Federal Funds Rate Notes, each
Business Day will be an Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date on a Federal Funds Rate Note will be the
Business Day prior to such Interest Reset Date.
PRIME RATE NOTES
Prime Rate Notes will bear interest at the interest rates (calculated with
reference to the Prime Rate and the Spread, or Spread Multiplier, if any)
specified in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date relating to a Prime Rate
Note, the arithmetic mean of the prime rates quoted on the basis of the actual
number of days in the year divided by a 360-day year as of the close of
business on such Interest Determination Date by three major money center banks
in The City of New York selected by the Calculation Agent. If fewer than three
quotations are provided, the Prime Rate shall be calculated by the Calculation
Agent and shall be determined as the arithmetic mean on the basis of the prime
rates quoted in The City of New York on such date by three substitute banks or
trust companies organized and doing business under the laws of the United
States, or any State thereof, and unaffiliated with the Company, having total
equity capital of at least $500 million and being subject to supervision or
examination by a Federal or State authority, selected by the Calculation Agent;
provided, however, that if the substitute banks or trust companies selected as
aforesaid by the Calculation Agent are not quoting as mentioned in this
sentence, the Prime Rate will be the Prime Rate in effect on such Interest
Determination Date relating to a Prime Rate Note.
The Interest Determination Date pertaining to an Interest Reset Date on a
Prime Rate Note will be the Business Day prior to such Interest Reset Date.
LIBOR NOTES
LIBOR Notes will bear interest at the interest rates (calculated with
reference to LIBOR and the Spread or Spread Multiplier, if any) specified in
the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR with
respect to any Interest Determination Date relating to a LIBOR Note will equal
the arithmetic mean (as determined by the Calculation Agent) of the offered
rates which appear as of 11:00 A.M., London time, on the Reuters Screen LIBO
Page on the Reuter Monitor Money Rates Service for deposits (in United States
dollars for the period of the Index Maturity specified in the applicable
Pricing Supplement) commencing on the second day on which dealings in deposits
in United States dollars are transacted in the London interbank market (a
"London Banking Day") immediately following such Interest Determination Date;
provided, however, that if fewer than two such quotations appear, the
Calculation Agent shall request the principal London office of four major banks
in the London interbank market selected by the Calculation Agent to provide the
Calculation Agent with a quotation of their offered rates at approximately
11:00 A.M., London time, on such Interest Determination Date for deposits (in
United States dollars for the period of the applicable Index Maturity and in a
principal amount equal to an amount that is representative for a single
transaction in such market at such time) commencing on the second London
Banking Day immediately following such Interest Determination Date. If at least
two such quotations are provided, LIBOR for such Interest Determination Date
will equal the arithmetic mean of such quotations. If fewer than two quotations
are provided, LIBOR for such Interest Determination Date will equal the
arithmetic mean of the rates quoted by three major banks in The City of New
York, as selected by the Calculation Agent, at approximately 11:00 A.M., New
York
9
<PAGE>
City time, on such Interest Determination Date for loans to leading European
banks (in United States dollars for the period of the applicable Index Maturity
and in a principal amount equal to an amount that is representative for a
single transaction in such market at such time) commencing on the second London
Banking Day following such Interest Determination Date; provided, however, that
if the banks selected as aforesaid by the Calculation Agent are not quoting as
mentioned in this sentence, LIBOR for such Interest Determination Date will be
LIBOR in effect on such Interest Determination Date.
The Interest Determination Date pertaining to an Interest Reset Date on a
LIBOR Note will be the second London Banking Day next preceding such Interest
Reset Date.
TREASURY INDEX RATE NOTES
Treasury Index Rate Notes will bear interest at the interest rates
(calculated with reference to the Treasury Index Rate and the Spread or Spread
Multiplier, if any) specified in the applicable Pricing Supplement.
Unless otherwise indicated in the Pricing Supplement, "Treasury Index Rate"
means, with respect to any Interest Determination Date relating to a Treasury
Index Rate Note, the per annum discount rate for direct obligations of the
United States with a maturity of thirteen weeks ("91-day Treasury bills"),
expressed as a bond equivalent on the basis of a year of 365 or 366 days, at
the 91-day Treasury bill auction occurring on such Interest Determination Date
as published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates", or any successor
publication, under the heading "Treasury bills--auction average (investment)"
or (if not so published by 9:00 A.M. New York City time on the Calculation
Date) as reported by the United States Department of the Treasury. Such
Treasury bills are usually sold at auction on 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.
The day of each such auction of 91-day Treasury bills, unless otherwise
specified in the Pricing Supplement, will be an Interest Determination Date
(provided that the results of such auction are so published or reported), and
each Business Day following such an Interest Determination Date will be a
Treasury Index Rate Note Interest Reset Date. The rate of interest applicable
to Treasury Index Rate Notes will therefore not be reset during any period in
which such auctions are not held or the results of such auctions are not so
published or reported.
ZERO COUPON NOTES
Notes which do not bear interest ("Zero Coupon Notes") were initially offered
at a substantial discount from their principal amount at maturity. There will
be no periodic payments of interest. The calculation of the accrual of Original
Issue Discount (as defined below), in the period during which a Zero Coupon
Note remains outstanding, will be on a semiannual bond equivalent basis using a
year composed of twelve 30-day months. Upon maturity, Original Issue Discount
will cease to accrue on a Zero Coupon Note.
Limitation of Claims in Bankruptcy: If a bankruptcy proceeding is commenced
in respect of the Company, the claim of the Holder of a Zero Coupon Note with
respect to the principal amount thereof may, under Section 502(b)(2) of Title
11 of the United States Code, be limited to the issue price of the Zero Coupon
Note plus that portion of the Original Issue Discount that is amortized from
the date of issue to the commencement of the proceeding.
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an Indenture
(the "Senior Indenture"), dated as of April 1, 1983, as amended and restated,
between the Company and The Chase Manhattan Bank,
10
<PAGE>
(National Association) (successor to Manufacturers Hanover Trust Company), as
trustee (the "Trustee"). A copy of the Senior Indenture is filed as an exhibit
to the registration statements relating to the Securities. The following
summaries of certain provisions of the Senior Indenture do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
all provisions of the Senior Indenture, including the definition therein of
certain terms.
The Senior Indenture provides that series of Senior Debt Securities may from
time to time be issued thereunder, without limitation as to aggregate principal
amount, in one or more series and upon such terms as the Company may establish
pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the Securities
will be governed by and construed in accordance with the laws of the State of
New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senor Debt Securities previously
issued, and "reopen" a previously issued series of Senor Debt Securities and
issue additional Senor Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all other
unsecured and unsubordinated indebtedness of the Company. However, since the
Company is a holding company, the right of the Company, and hence the right of
creditors of the Company (including the Holders of Senor Debt Securities), to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the prior
claims of creditors of the subsidiary, except to the extent that claims of the
Company itself as a creditor of the subsidiary may be recognized. In addition,
dividends, loans and advances from certain subsidiaries, including MLPF&S, to
the Company are restricted by net capital requirements under the Securities
Exchange Act of 1934, as amended, and under rules of certain exchanges and
other regulatory bodies.
LIMITATIONS UPON LIENS
The Senior Indenture provides that the Company may not, and may not permit
any Subsidiary to, create, assume, incur or permit to exist any indebtedness
for borrowed money secured by a pledge, lien or other encumbrance (except for
certain liens specifically permitted by the Senior Indenture) on the Voting
Stock owned directly or indirectly by the Company of any Subsidiary (other than
a Subsidiary which, at the time of the incurrence of such secured indebtedness,
has a net worth of less than $3,000,000) without making effective provision
whereby the Outstanding Senior Debt Securities will be secured equally and
ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS BY,
MLPF&S
The Senior Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue, sell
or otherwise dispose of any of its Voting Stock, unless, after giving effect to
any such transaction, MLPF&S remains a Controlled Subsidiary (defined in the
Senior Indenture to mean a corporation more than 80% of the outstanding shares
of Voting Stock of which owned directly or indirectly by the Company). In
addition, the Company may not permit MLPF&S to (i) merge or consolidate, unless
the surviving company is a Controlled Subsidiary or (ii) convey or transfer its
properties and assets substantially as an entirety, except to one or more
Controlled Subsidiaries.
MERGER AND CONSOLIDATION
The Senior Indenture provides that the Company may consolidate or merge with
or into any other corporation, and the Company may sell, lease or convey all or
substantially all of its assets to any corporation, provided that (i) the
corporation (if other than the Company) formed by or resulting from any such
consolidation or merger or which shall have received such assets shall be a
corporation organized and existing
11
<PAGE>
under the laws of the United States of America or a state thereof and shall
assume payment of the principal of (and premium, if any) and interest on the
Senior Debt Securities and the performance and observance of all of the
covenants and conditions of the Senior Indenture to be performed or observed by
the Company, and (ii) the Company or such successor corporation, as the case
may be, shall not immediately thereafter be in default under the Senior
Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Senior Indenture may be effected by the
Company and the Trustee with the consent of the Holders of at least 66 2/3% in
principal amount of the outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Senior Debt Security affected thereby, (a) change the Stated
Maturity of the principal of, or any installment of interest or Additional
Amounts payable on, any Senior Debt Security or any premium payable on the
redemption thereof, or change the Redemption Price; (b) reduce the principal
amount of, or the interest or Additional Amounts payable on, any Senior Debt
Security or reduce the amount of principal which could be declared due and
payable prior to the Stated Maturity; (c) change place or currency of any
payment of principal or any premium, interest or Additional Amounts payable on
any Senior Debt Security; (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any Senior Debt Security; (e)
reduce the percentage in principal amount of the Outstanding Senior Debt
Securities of any series, the consent of whose Holders is required to modify or
amend the Indenture; or (f) modify the foregoing requirements or reduce the
percentage of Outstanding Senior Debt Securities necessary to waive any past
default to less than a majority. No modification or amendment of the
Subordinated Indenture or any Subsequent Indenture for Subordinated Debt
Securities may adversely affect the rights of any holder of Senior Indebtedness
without the consent of such Holder. Except with respect to certain fundamental
provisions, the Holders of at least a majority in principal amount of
Outstanding Senior Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Defaults with
respect to Senior Debt Securities of any series: (a) default in the payment of
any interest or Additional Amounts payable on any Senior Debt Security of that
series when due, continued for 30 days; (b) default in the payment of any
principal or premium, if any, on any Senior Debt Security of that series when
due; (c) default in the deposit of any sinking fund payment, when due, in
respect of any Senior Debt Security of that series; (d) default in the
performance of any other covenant of the Company contained in the Indenture for
the benefit of such series or in the Senior Debt Securities of such series,
continued for 60 days after written notice as provided in the Senior Indenture;
(e) certain events in bankruptcy, insolvency or reorganization; and (f) any
other Event of Default provided with respect to Senior Debt Securities of that
series. The Trustee or the Holders of 25% in principal amount of the
Outstanding Senior Debt Securities of that series may declare the principal
amount (or such lesser amount as may be provided for in the Senior Debt
Securities of that series) of all Outstanding Senior Debt Securities of that
series and the interest due thereon and Additional Amounts payable in respect
thereof, if any to be due and payable immediately if an Event of Default with
respect to Senior Debt Securities of such series shall occur and be continuing
at the time of such declaration. At any time after a declaration of
acceleration has been made with respect to Senior Debt Securities of any series
but before a judgment or decree for payment of money due has been obtained by
the Trustee, the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those due as
a result of acceleration) have been made and all Events of Default have been
remedied or waived. Any Event of Default with respect to Senior Debt Securities
of any series may be waived by the Holders of a majority in principal amount of
all Outstanding Senior Debt Securities of that series, except in a case of
failure to pay principal or premium, if any, or interest
12
<PAGE>
or Additional Amounts payable on any Senior Debt Security of that series for
which payment had not been subsequently made or in respect of a covenant or
provision which cannot be modified or amended without the consent of the Holder
of each Outstanding Senior Debt Security of such series affected.
The Holders of a majority in principal amount of the Outstanding Senior Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee with respect to Senior Debt Securities of such
series, provided that such direction shall not be in conflict with any rule of
law or the Senior Indenture. Before proceeding to exercise any right or power
under the Senior Indenture at the direction of such Holders, the Trustee shall
be entitled to receive from such Holders reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it in
complying with any such direction.
The Company is required to furnish to the Trustee annually a statement as to
the fulfillment by the Company of all of its obligations under the Senior
Indenture.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated by
reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating Results",
Financial Position" and "Common Share Data" for each of the five years in the
period ended December 30, 1994 included in the 1994 Annual Report to
Stockholders of the Company and incorporated by reference herein, has been
derived from consolidated financial statements audited by Deloitte & Touche
LLP, as set forth in their reports incorporated by reference herein. Such
consolidated financial statements and related financial statement schedules,
and such Selected Financial Data incorporated by reference in this Prospectus
and the Registration Statement of which this Prospectus is a part, have been
included or incorporated herein by reference in reliance upon such reports of
Deloitte & Touche LLP given upon their authority as experts in accounting and
auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their report included in any such Quarterly Report on
Form 10-Q and incorporated by reference herein, they did not audit and they do
not express an opinion on such interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Deloitte & Touche
LLP are not subject to the liability provisions of Section 11 of the Act for
any such report on unaudited interim financial information because any such
report is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the Act.
13
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
P R O S P E C T U S
- -------------------
MERRILL LYNCH & CO., INC.
SENIOR DEBT SECURITIES
Merrill Lynch & Co., Inc. (the "Company") has issued and intends from time
to time to issue senior debt securities (the "Senior Debt Securities" or the
"Securities") pursuant to an indenture, dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company).
____________________
The following Securities have been issued and the indicated aggregate
principal amounts are outstanding as of the date hereof:
<TABLE>
<CAPTION>
Floating Rate Notes Redeemable Notes
- -------------------------------------- --------------------------------------
<S> <C>
$100,000,000 of Constant Maturity $50,000,000 of Step-Up Notes due
Treasury Rate Indexed Notes due January 26, 2000;
March 24, 1997. $80,000,000 of Step-Up Notes due
April 30, 2002;
$25,000,000 of Step-Up Notes due May
6, 2002;
$150,000,000 of 7.05% Notes due April
15, 2003;
$125,000,000 of 6 3/8% Notes due
September 8, 2006; and
$33,015,000 of 8.40% Notes due
November 1, 2019.
</TABLE>
Non-Redeemable Fixed Rate Notes
-------------------------------
<TABLE>
<C> <S>
$100,000,000 of 5 1/4% Notes due October 30, 1995;
$200,000,000 of 5 7/8% Notes due December 1, 1995;
$300,000,000 of 4 3/4% Notes due June 24, 1996;
$200,000,000 of 5% Notes due December 15, 1996;
$150,000,000 of 7.25% Notes due May 15, 1997;
$250,000,000 of 9% Notes due May 1, 1998;
$165,000,000 of 10 3/8% Notes due February 1, 1999;
$175,000,000 of 7 3/4% Notes due March 1, 1999;
$200,000,000 of 6 3/8% Notes due March 30, 1999;
$300,000,000 of 8 1/4% Notes due November 15, 1999;
$150,000,000 of 8 3/8% Notes due February 9, 2000;
$150,000,000 of 6.70% Notes due August 1, 2000;
$225,000,000 of 8% Notes due February 1, 2002;
$150,000,000 of 7 3/8% Notes due August 17, 2002;
$150,000,000 of 8.30% Notes due November 1, 2002;
$200,000,000 of 6 7/8% Notes due March 1, 2003;
$200,000,000 of 6 1/4% Notes due January 15, 2006;
$150,000,000 of 8% Notes due June 1, 2007;
$250,000,000 of 7% Notes due April 27, 2008; and
$150,000,000 of 6 1/4% Notes due October 15, 2008.
</TABLE>
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
____________________
This Prospectus has been prepared in connection with the Securities and is
to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Securities.
MLPF&S may act as principal or agent in such transactions. The Securities may
be offered on a national securities exchange in the event the particular issue
of Securities has been listed on such exchange, or off such exchange in
negotiated transactions, or otherwise. Sales will be made at prices related to
prevailing prices at the time of sale. The distribution of the Securities will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
____________________
MERRILL LYNCH & CO.
____________________
THE DATE OF THIS PROSPECTUS IS , 1995.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
AVAILABLE INFORMATION............................ 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.. 2
MERRILL LYNCH & CO., INC......................... 3
DESCRIPTION OF SENIOR DEBT SECURITIES............ 3
Floating Rate Notes......................... 6
Redeemable Notes............................ 8
Non-Redeemable Fixed Rate Notes............. 11
OTHER TERMS...................................... 11
EXPERTS.......................................... 14
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Midwest Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Reports, proxy and information
statements and other information concerning the Company may also be inspected at
the offices of the New York Stock Exchange, the American Stock Exchange, the
Chicago Stock Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995 and
June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995, January
23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March 9, 1995,
April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21, 1995, August
1, 1995, and August 2, 1995 filed pursuant to Section 13 of the Exchange Act,
are hereby incorporated by reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the maturity of the Securities shall be deemed to be incorporated by reference
into this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
(WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE) OF
ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. REQUESTS
FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T. RUSSO, SECRETARY, MERRILL
LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR, NEW YORK, NEW YORK 10080-6512;
TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES OR AN OFFER TO, OR A SOLICITATION OF AN OFFER TO BUY FROM, ANY PERSON IN
ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. THE DELIVERY OF THIS
PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stocks dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
DESCRIPTION OF SENIOR DEBT SECURITIES
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). The
following summaries of certain provisions of the Senior Indenture do not
purport to be complete and are subject to, and are qualified in their
entirety by reference to, all provisions of the Senior Indenture, including
the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities
may from time to time be issued thereunder, without limitation as to
aggregate principal amount, and upon such terms as the Company may
establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York. Under present New York law the maximum rate of
interest is 25% per annum on a simple interest basis. This limit may not
apply to Securities in which $2,500,000 or more has been invested. While
the Company believes that New York law would be given effect by a state or
Federal court sitting outside of New York, state laws frequently regulate
the amount of interest that may be charged to and paid by a borrower
(including, in some cases, corporate borrowers). The Company has
covenanted for the benefit of the Holders of Securities, to the extent
permitted by law, not to claim voluntarily the benefits of any laws
concerning usurious rates of interest against a Holder of Securities.
3
<PAGE>
The Outstanding Senior Debt Securities are issuable only in fully
registered form without coupons, in denominations set forth below under
each description of Outstanding Senior Debt Securities. No service charge
will be made for any registration of transfer or exchange of such Senior
Debt Securities, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charges that may be imposed in
connection therewith. The description below indicates that certain of the
Outstanding Senior Debt Securities have been issued in global form (see
"Book-Entry Securities").
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of the Senior
Debt Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Exchange Act and under rules of
certain exchanges and other regulatory bodies.
Any principal, premium and interest will be payable, the transfer of
the Senior Debt Securities will be registrable, and Senior Debt Securities
will be exchangeable, at the office of the Trustee in New York City
designated for such purpose, provided that (except as otherwise set forth
below with respect to any series of Senior Debt Securities) payment of
interest may be made at the option of the Company by check mailed to the
address of the person entitled thereto as shown on the Security Register.
Unless otherwise specified with respect to a particular series of
Senior Debt Securities, the Senior Debt Securities are not subject to any
sinking fund and are not redeemable prior to maturity.
Unless otherwise specified, terms defined under a caption for a
specific series of Senior Debt Securities shall have such meanings only as
to the Senior Debt Securities described therein.
BOOK-ENTRY SECURITIES
Certain of the Outstanding Senior Debt Securities have been issued in
global form (such Senior Debt Securities are hereinafter referred to as
"Book-Entry Securities"). Such Book-Entry Securities are represented by
one or more fully registered global securities (the "Global Notes"). Each
such Global Note has been deposited with, or on behalf of, The Depository
Trust Company ("DTC"), as Depository, registered in the name of DTC or a
nominee thereof. Unless and until it is exchanged in whole or in part for
Senior Debt Securities in definitive form, no Global Note may be
transferred except as a whole by the Depository to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by such Depository or any such nominee to a
successor of such Depository or a nominee of such successor.
DTC has advised the Company as follows: DTC is a limited-purpose
trust company organized under the Banking Law 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 pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended. DTC was created to hold securities of
its participants ("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. DTC's Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations, including the Underwriters.
DTC is owned by a number of Participants and by the New York Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to DTC's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain
a custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Purchases of Book-Entry Securities must be made by or through
Participants, which will receive a credit
4
<PAGE>
on the records of DTC. The ownership interest of each actual purchaser of
each Book-Entry Security (the "Beneficial Owner") is in turn to be recorded
on the Participants' or Indirect Participants' records. Beneficial Owners
will not receive written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Participant or Indirect Participant through which the
Beneficial Owner entered into the transaction. Ownership of beneficial
interests in Global Notes will be shown on, and the transfer of such
ownership interests will be effected only through, records maintained by
DTC (with respect to interests of Participants) and on the records of
Participants (with respect to interests of persons held through
Participants). The laws of some states may 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 own, transfer or pledge
beneficial interests in Global Notes.
So long as DTC, or its nominee, is the registered owner of a Global
Note, DTC or its nominee, as the case may be, will be considered the sole
owner or Holder of the Book-Entry Securities represented by such Global
Note for all purposes under the Indenture. Except as provided below,
Beneficial Owners in a Global Note will not be entitled to have the Book-
Entry Securities represented by such Global Note registered in their names,
will not receive or be entitled to receive physical delivery of the Book-
Entry Securities in definitive registered form and will not be considered
the owners or Holders thereof under the Indenture. Accordingly, each
Person owning a beneficial interest in a Global Note must rely on the
procedures of DTC 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 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, DTC 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. Conveyance of notices and
other communications by DTC to Participants, by Participants to Indirect
Participants, and by Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal of, and interest on, Book-Entry Securities
registered in the name of DTC or its nominee will be made to DTC or its
nominee, as the case may be, as the Holder of the Global Note or Global
Notes representing such Book-Entry Securities. None of the Company, the
Trustee or any other agent of the Company or agent of the Trustee will have
any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that DTC, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit the accounts
of the Participants with payment in amounts proportionate to their
respective holdings in principal amount of beneficial interest in such
Global Note as shown on the records of DTC. The Company also expects that
payments by Participants to Beneficial Owners will be governed by standing
customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of such Participants.
If (x) any Depository is at any time unwilling or unable to continue
as Depository and a successor depository is not appointed by the Company
within 60 days, or (y) the Company executes and delivers to the Trustee a
Company Order to the effect that the Global Notes shall be exchangeable, or
(z) an Event of Default has occurred and is continuing with respect to the
Book-Entry Securities, the Global Note or Global Notes will be exchangeable
for Senior Debt Securities in definitive form of like tenor and of an equal
aggregate principal amount, in denominations of $1,000 and integral
multiples thereof. Such definitive Senior Debt Securities shall be
registered in such name or names as the Depository shall instruct the
Trustee. It is expected that such instructions may be based upon
directions received by the Depository from Participants with respect to
ownership of beneficial interests in Global Notes.
All payments of principal and interest on the Book-Entry Securities
will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate
issuers is generally settled in clearing house or next-day funds. In
contrast, the Book-Entry Securities will trade in the Depository's Same-Day
Funds Settlement System and secondary trading activity in the Book-Entry
Securities will therefore be required by the Depository to settle in
immediately available funds. No assurance can be given as to the effect,
if any, of settlement in immediately available funds on trading activity in
the Book-Entry Securities.
5
<PAGE>
FLOATING RATE NOTES
TERMS AND PROVISIONS OF CONSTANT MATURITY TREASURY RATE
INDEXED NOTES DUE MARCH 24, 1997/*/
GENERAL
The Constant Maturity Treasury Rate Indexed Notes due March 24, 1997
(the "CMT Notes") will mature on March 24, 1997 (the "Maturity Date"). The
CMT Notes are not subject to redemption by the Company prior to the
Maturity Date. The CMT Notes are to be issued only in fully registered
form without coupons in denominations of $1,000 and integral multiples
thereof.
INTEREST
The CMT Notes will bear interest from March 24, 1994, payable
quarterly on March 24, June 24, September 24, and December 24 of each year
(each an "Interest Payment Date"), commencing June 24, 1994, to the persons
in whose names the CMT Notes are registered on the preceding March 9, June
9, September 9 and December 9, respectively.
The rate of interest payable on the CMT Notes will be reset on each
Interest Payment Date, and will equal a per annum rate equal to the
Constant Maturity Treasury Rate (as defined below) minus .30%, as
determined on each Interest Determination Date by Merrill Lynch Capital
Services, Inc. (the "Calculation Agent"), a subsidiary of the Company.
Interest payments on the CMT Notes will equal the amount of interest
accrued from and including the immediately preceding Interest Payment Date
in respect of which interest has been paid (or from and including the date
of issue, if no interest has been paid with respect to the CMT Notes), to
but excluding the related Interest Payment Date or Maturity Date.
Accrued interest on the CMT Notes will be calculated by multiplying
the face amount of each CMT Note by an accrued interest factor. Such
accrued interest factor will be computed by adding the interest factor
calculated for each day for which interest is being calculated. The
interest factor for each such day will be computed by dividing the interest
rate applicable to such day by the actual number of days during the
applicable year.
The interest rate in effect on each day shall be (a) if such day is an
Interest Payment Date, the interest rate determined as of the Interest
Determination Date (as defined below) immediately preceding such Interest
Payment date or (b) if such day is not an Interest Payment Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Payment Date.
The interest rate applicable to each interest reset period will be the
rate determined as of the applicable Interest Determination Date with
respect to the Interest Payment Date on which such period commences. The
"Interest Determination Date" pertaining to an Interest Payment Date will
be the second Business Day preceding such Interest Payment Date.
"Constant Maturity Treasury Rate" means for any Interest Determination
Date:
(i) The rate which appears on Telerate Page 7052, "WEEKLY AVG
YIELDS ON TREASURY CONSTANT MATURITIES", under the column entitled "2
YR" and in the row opposite the date of the last Business Day (as
defined below) of the week prior to the Interest Determination Date
appearing in the column entitled "WEEK END", which appears as of 5:00
P.M., New York City time, on the applicable Interest Determination
Date. "Telerate Page 7052" means the display designated as page 7052
on the Dow Jones Telerate Service (or such page as may replace page
7052 on that service). The rate which appears on Telerate Page 7052
under the column entitled "2 YR" is the rate described in paragraph
(ii) below published in the most recent H.15(519) (as defined below).
(ii) If the Constant Maturity Treasury Rate as described in
clause (i) is not available by 5:00 P.M.,
/*/Book-Entry Securities
6
<PAGE>
New York City time, on the applicable Interest Determination Date, the
Constant Maturity Treasury Rate will equal the one-week average yield
on United States Treasury securities at "constant maturity", as
published in the most recent H.15(519) in the column entitled "Week
Ending" for the date of the last Business Day of the week prior to the
Interest Determination Date and opposite the heading "Treasury
constant maturities-2-year".
(iii) If the most recent H.15(519) available on the applicable
Interest Determination Date as described in clause (ii) above does not
contain a heading for the date of the last Business Day of the week
prior to the Interest Determination Date under the column entitled
"Week Ending", the Constant Maturity Treasury Rate will be such United
States Treasury constant maturity rate (or other United States
Treasury rate) for two-year United States Treasury securities at
"constant maturity" for such Interest Determination Date (a) as may
then be published by either the Board of Governors of the Federal
Reserve System or the United States Department of the Treasury, and
(b) that the Calculation Agent determines to be comparable to the rate
formerly published in H.15(519).
(iv) If the Constant Maturity Treasury Rate as described in
clause (iii) is not published on the Interest Determination Date, the
Constant Maturity Treasury Rate will be a yield to maturity for direct
noncallable fixed rate obligations of the United States ("Treasury
Notes") most recently issued with an original maturity of
approximately two years and an original issue date within the
immediately preceding year based on the yield (which yield in based on
asked prices) for such issue of Treasury Notes for such Interest
Determination Date, as published by the Federal Reserve Bank of New
York in its daily statistical release entitled "Composite 3:30 P.M.
Quotations for U.S. Government Securities" (or any successor or
similar publication selected by the Calculation Agent published by the
Board of Governors of the Federal Reserve System, the Federal Reserve
Bank of New York or any other Federal Reserve Bank or affiliated
entity).
(v) If the Constant Maturity Treasury Rate as described in clause
(iv) is not published on the Interest Determination Date, the Constant
Maturity Treasury Rate will be calculated by the Calculation Agent and
will be a yield to maturity (expressed as a bond equivalent and as a
decimal rounded, if necessary, to the nearest one hundred-thousandth
of a percentage point with five one-millionths of a percentage point
rounded up, on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) based on the arithmetic mean of the
secondary market bid prices as of approximately 3:30 P.M., New York
City 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 (from five such dealers 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 approximately
two years and an original issue date within the immediately preceding
year. If three or four (and not five) of such dealers are quoting as
described in this clause (v), the Constant Maturity Treasury Rate will
be based on the arithmetic mean of the bid prices obtained and neither
the highest nor the lowest of such quotations will be eliminated.
(vi) If fewer than three dealers selected by the Calculation
Agent are quoting as described in clause (v), the Constant Maturity
Treasury Rate will be calculated by the Calculation Agent and will be
a yield to maturity (expressed as a bond equivalent and as a decimal
rounded, if necessary, to the nearest one hundred-thousandth of a
percentage point with five one-millionths of a percentage point
rounded up, on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) based on the arithmetic mean of the
secondary market bid prices as of approximately 3:30 P.M., New York
City Time, on the applicable Interest Determination Date of three
leading primary United States government securities dealers in The
City of New York selected by the Calculation Agent (from five such
dealers 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 approximately ten years and a remaining term to
maturity closest to two years. If three or four (and not five) of
such dealers are quoting as described in this clause (v), then the
Constant Maturity Treasury Rate will be based on the arithmetic mean
of the bid prices obtained and neither the highest nor the lowest of
such quotations will be eliminated.
(vii) If fewer than three dealers selected by the Calculation
Agent are quoting as described in clause (vi), the Constant Maturity
Treasury Rate will be the Constant Maturity Treasury Rate in effect on
the preceding Interest Payment Date.
7
<PAGE>
In the case of clause (vi), if two Treasury Notes with an original
maturity of approximately ten years have remaining terms to maturity
equally close to two years, the quotes for the Treasury Note with the
shorter remaining term to maturity will be used.
If any Interest Payment Date would otherwise be a day that is not a
Business Day, such Interest Payment Date will be postponed to the next
succeeding day that is a Business Day.
"H.15(519)" means the weekly statistical release designated as such,
published by the Board of Governors of the Federal Reserve System.
"Business Day" means any day other than a Saturday or Sunday or any
other day on which banks in The City of New York are generally authorized
or obligated by law or executive order to close.
All percentages resulting from any calculation on the CMT Notes will
be rounded to the nearest one hundred-thousandth of a percentage point,
with five one-millionths of a percentage point rounded upwards (e.g.,
9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and
all dollar amounts used in or resulting from such calculation on the CMT
Notes will be rounded to the nearest cent (with one-half cent being rounded
upward).
REDEEMABLE NOTES
TERMS AND PROVISIONS OF STEP-UP NOTES DUE JANUARY 26, 2000/*/
General
The Step-Up Notes due January 26, 2000 (the "Step-Up Notes due January
26, 2000") will mature on January 26, 2000 unless redeemed earlier as
provided below. The rate of interest on the Step-Up Notes due January 26,
2000 from and including January 26, 1993 to but excluding January 26, 1996
will be 6.14% per annum, and thereafter the rate of interest will be 8.50%
per annum. The Step-Up Notes due January 26, 2000 will bear interest from
January 26, 1993, payable semiannually on January 26 and July 26 of each
year (each an "Interest Payment Date"), commencing July 26, 1993, to the
persons in whose names the Step-Up Notes due January 26, 2000 are
registered on the preceding January 11 and July 11, respectively. The
Step-Up Notes due January 26, 2000 are to be issued only in fully
registered form, in denominations of $1,000 and integral multiples thereof.
The Step-Up Notes due January 26, 2000 are Book-Entry Securities, as
described above.
Redemption by the Company
The Step-Up Notes due January 26, 2000 are subject to redemption at
the option of the Company on any Interest Payment Date on or after January
26, 1996, in whole or in part in increments of $1,000, at a redemption
price of 100% of the principal amount thereof to be redeemed plus accrued
interest thereon to but excluding the Redemption Date. Notice of
redemption of the Step-Up Notes due January 26, 2000 shall be given not
less than 30 or more than 60 days prior to the Redemption Date to each
Holder of Step-Up Notes due January 26, 2000 to be redeemed.
TERMS AND PROVISIONS OF STEP-UP NOTES DUE APRIL 30, 2002
General
The Step-Up Notes due April 30, 2002 (the "Step-Up Notes due April 30,
2002") will mature on April 30, 2002 unless redeemed earlier as provided
below. The rate of interest on the Step-Up Notes due April 30, 2002 from
and including April 30, 1992 to but excluding April 30, 1997 will be 8.23%
per annum, and, thereafter, the rate of interest will be 9.50% per annum.
The Step-Up Notes due April 30, 2002 will bear interest from April 30,
1992, payable semiannually on April 30 and October 30 of each year,
commencing October 30, 1992, to the persons in whose names the Step-Up
Notes due April 30, 2002 are registered on the preceding April 15 or
October 15,
/*/ Book-Entry Securities.
8
<PAGE>
respectively. The Step-Up Notes due April 30, 2002 are to be issued only
in fully registered form without coupons, in denominations of $1,000 and
integral multiples thereof.
Redemption by the Company
The Step-Up Notes due April 30, 2002 are subject to redemption at the
option of the Company on or after April 30, 1997, in whole or in part in
increments of $1,000, at a redemption price of 100% of the principal amount
thereof to be redeemed plus accrued interest thereon to but excluding the
Redemption Date. Notice of redemption of the Step-Up Notes due April 30,
2002 shall be mailed not less than 30 or more than 60 days prior to the
Redemption Date to each Holder of Step-Up Notes due April 30, 2002 to be
redeemed.
TERMS AND PROVISIONS OF STEP-UP NOTES DUE MAY 6, 2002
General
The Step-Up Notes due May 6, 2002 (the "Step-Up Notes due May 6,
2002") will mature on May 6, 2002 unless redeemed earlier as provided
below. The rate of interest on the Step-Up Notes due May 6, 2002 from and
including May 6, 1992 to but excluding May 6, 1997 will be 8.18% per annum,
and thereafter the rate of interest will be 9.40% per annum. The Step-Up
Notes due May 6, 2002 will bear interest from May 6, 1992, payable
semiannually on May 6 and November 6 of each year, commencing November 6,
1992, to the persons in whose names the Step-Up Notes due May 6, 2002 are
registered on the preceding April 21 or October 22, respectively. The
Step-Up Notes due May 6, 2002 are to be issued only in fully registered
form without coupons, in denominations of $1,000 and integral multiples
thereof.
Redemption by the Company
The Step-Up Notes due May 6, 2002 are subject to redemption at the
option of the Company on or after May 6, 1997, in whole or in part in
increments of $1,000, at a redemption price of 100% of the principal amount
thereof to be redeemed plus accrued interest thereon to but excluding the
Redemption Date. Notice of redemption of the Step-Up Notes due May 6, 2002
shall be mailed not less than 30 or more than 60 days prior to the
Redemption Date to each Holder of Step-Up Notes due May 6, 2002 to be
redeemed.
TERMS AND PROVISIONS OF 7.05% NOTES DUE APRIL 15, 2003/*/
General
The 7.05% Notes due April 15, 2003 (the "7.05% Notes") will mature on
April 15, 2003 unless redeemed earlier as provided below. The 7.05% Notes
bear interest payable semiannually on each October 15 and April 15 to the
persons in whose names the 7.05% Notes are registered on the next preceding
October 1 and April 1, respectively. The 7.05% Notes are issuable and
transferable only in fully registered form without coupons, in
denominations of $1,000 and integral multiples thereof.
Redemption by the Company
The 7.05% Notes are subject to redemption at the option of the Company
on or after April 15, 1998, in whole or in part in increments of $1,000, at
a redemption price of 100% of the principal amount thereof to be redeemed
plus accrued interest thereon to but excluding the Redemption Date. Notice
of redemption of the 7.05% Notes shall be given not less than 30 or more
than 60 days prior to the Redemption Date to each Holder of 7.05% Notes to
be redeemed.
/*/ Book-Entry Securities.
9
<PAGE>
TERMS AND PROVISIONS OF 6 3/8% NOTES DUE SEPTEMBER 8, 2006/*/
General
The 6 3/8% Notes due September 8, 2006 (the "6 3/8% Notes") will
mature on September 8, 2006 unless redeemed earlier as provided below. The
6 3/8% Notes bear interest payable semiannually on each March 8 and
September 8 to the persons in whose names the 6 3/8% Notes are registered
on the next preceding February 23 and August 23, respectively. The 6 3/8%
Notes are issuable and transferable only in fully registered form without
coupons, in denominations of $1,000 and integral multiples thereof.
Redemption by the Company
The 6 3/8% Notes are subject to redemption at the option of the
Company on or after September 8, 2003, in whole or in part in increments of
$1,000, at a redemption price of 100% of the principal amount thereof to be
redeemed plus accrued interest thereon to but excluding the Redemption
Date. Notice of redemption of the 6 3/8% Notes shall be given not less
than 30 or more than 60 days prior to the Redemption Date to each Holder of
6 3/8% Notes to be redeemed.
TERMS AND PROVISIONS OF 8.40% NOTES DUE NOVEMBER 1, 2019
General
The 8.40% Notes due November 1, 2019 (the "8.40% Notes") will mature
on November 1, 2019. The 8.40% Notes bear interest payable semiannually on
each May 1 and November 1 to the persons in whose names the 8.40% Notes are
registered on the next preceding April 15 and October 15, respectively.
The 8.40% Notes are issuable and transferable only in fully registered form
without coupons, in denominations of $1,000 and integral multiples thereof.
Repayment at Option of Holder
Each 8.40% Note will be repayable on November 1, 1994, at the option
of the Holder thereof, at 100% of its principal amount, together with
accrued interest to November 1, 1994. In order for an 8.40% Note to be
repaid, the Company must receive at the office of the Trustee: if by mail,
Chemical Bank, J.P.F. Building, P.O. Box 2862, New York, New York 10016-
2862, Attention: Debt Operations--Puts; if by hand, Chemical Bank,
Securities Window, 55 Water Street--Room 234, North Building, New York, New
York 10041, Attention: Debt Operations--Puts (or at such other address of
which the Company shall from time to time notify the Holders of the 8.40%
Notes): (i) during the period from and including September 1, 1994 to and
including the close of business on October 1, 1994 (or if October 1, 1994
is not a Business Day, the immediately preceding Business Day) an 8.40%
Note with the form entitled "Option to Elect Repayment" on the reverse of
the 8.40% Note duly completed or (ii) (a) during the period from and
including September 1, 1994 to and including the close of business on
October 1, 1994 (or if October 1, 1994 is not a Business Day, the
immediately preceding Business Day) a telegram, telex, facsimile
transmission or letter from a member of a national securities exchange or
the National Association of Securities Dealers, Inc. or a commercial bank
or a trust company in the United States of America dated no later than
October 1, 1994 (or, if October 1, 1994 is not a Business Day, the
immediately preceding Business Day) and setting forth the name of the
Holder of the 8.40% Note, the principal amount of the 8.40% Note, the
amount of the 8.40% Note to be repaid, a statement that the option to elect
repayment is being exercised thereby and a guarantee that the 8.40% Note to
be repaid (with the form entitled "Option to Elect Repayment" on the
reverse of the 8.40% Note duly completed) will be received at the above-
mentioned office of the Trustee, not later than five Business Days after
the date of such telegram, telex, facsimile transmission or letter, and (b)
such 8.40% Note and form duly completed received at such office of the
Trustee by such fifth Business Day. Effective exercise of the repayment
option by the Holder of any 8.40% Note shall be irrevocable. No transfer
or exchange of any 8.40% Note (or, in the event that any 8.40% Note is to
be repaid in part, such portion of the 8.40% Note to be repaid) will be
permitted after exercise of the repayment option. The repayment option may
be exercised by the Holder of an 8.40% Note for less than the entire
principal amount of the 8.40% Note, provided that the principal amount
which is to be repaid is equal to $1,000 or any integral multiple thereof.
All questions as to the validity, eligibility (including time of receipt)
and acceptance of any 8.40% Note for repayment will be determined by the
Company, whose determination will be final, binding and non-appealable.
10
<PAGE>
Redemption by the Company
The 8.40% Notes are not redeemable by the Company prior to maturity
unless $20,000,000 or less of aggregate principal amount of the 8.40% Notes
are outstanding, in which case the 8.40% Notes are redeemable at any time
on or after November 1, 1994, in whole but not in part, on at least 15 days
and not more than 60 days prior notice at a redemption price of 100% of
principal amount thereof plus accrued interest thereon to the date of
redemption.
NON-REDEEMABLE FIXED RATE NOTES
GENERAL TERMS AND PROVISIONS OF NON-REDEEMABLE FIXED RATE NOTES
Each series of Non-Redeemable Fixed Rate Notes will bear interest at a
specified rate payable semiannually through maturity to the persons in
whose names the Notes are registered on the Regular Record Date preceding
each Interest Payment Date. The Non-Redeemable Fixed Rate Notes are not
subject to redemption by the Company or repayment at the option of the
holders thereof prior to their stated maturity dates, and are issuable and
transferable in denominations of $1,000 and any integral multiple thereof.
Beneficial interests in Non-Redeemable Fixed Rate Notes that are Book-Entry
Securities may be acquired, or subsequently transferred, only in
denominations of $1,000 and integral multiples thereof. The title of each
series of Non-Redeemable Fixed Rate Notes designates the interest rate and
maturity date of such Notes.
TERMS OF SERIES OF NON-REDEEMABLE FIXED RATE NOTES
<TABLE>
<CAPTION>
Series Interest Payment Dates Regular Record Dates
- ------------------------------------------- ------------------------- -------------------------
<S> <C> <C>
5 1/4% Notes due October 30, 1995/*/ April 30 and October 30 April 15 and October 15
5 7/8% Notes due December 1, 1995/*/ June 1 and December 1 May 15 and November 15
4 3/4% Notes due June 24, 1996/*/ June 24 and December 24 June 9 and December 9
5% Notes due December 15, 1996/*/ June 15 and December 15 May 31 and November 30
7.25% Notes due May 15, 1997 May 15 and November 15 May 1 and November 1
9% Notes due May 1, 1998 May 1 and November 1 April 15 and October 15
10 3/8% Notes due February 1, 1999 February 1 and August 1 January 15 and July 15
7 3/4% Notes due March 1, 1999 March 1 and September 1 February 15 and August 15
6 3/8% Notes due March 30, 1999/*/ March 30 and September 30 March 15 and September 15
8 1/4% Notes due November 15, 1999 May 15 and November 15 May 1 and November 1
8 3/8% Notes due February 9, 2000/*/ February 9 and August 9 January 25 and July 25
6.70% Notes due August 1, 2000/*/ February 1 and August 1 January 15 and July 15
8% Notes due February 1, 2002 February 1 and August 1 January 15 and July 15
7 3/8% Notes due August 17, 2002/*/ February 17 and August 17 February 2 and August 2
8.30% Notes due November 1, 2002 May 1 and November 1 April 15 and October 15
6 7/8% Notes due March 1, 2003/*/ March 1 and September 1 February 15 and August 15
6 1/4% Notes due January 15, 2006/*/ January 15 and July 15 January 1 and July 1
8% Notes due June 1, 2007 June 1 and December 1 May 15 and November 15
7% Notes due April 27, 2008/*/ April 27 and October 27 April 12 and October 12
6 1/4% Notes due October 15, 2008/*/ April 15 and October 15 March 31 and September 30
</TABLE>
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under
an Indenture (the "Senior Indenture"), dated as of April 1, 1983, as
amended and restated, between the Company and Chemical Bank (successor by
merger to Manufacturers Hanover Trust Company), as trustee (the "Trustee").
A copy of the Senior Indenture is filed as an exhibit to the registration
statements relating to the Securities. The following summaries of certain
provisions of the Senior Indenture do not purport to be complete and are
subject to, and qualified in their entirety by reference to, all provisions
of the Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt
Securities may from time to time be issued thereunder, without limitation
as to aggregate principal amount, in one or more series and upon such terms
as the
/*/ Book-Entry Securities.
11
<PAGE>
Company may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior
Debt Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with
all other unsecured and unsubordinated indebtedness of the Company.
However, since the Company is a holding company, the right of the Company,
and hence the right of creditors of the Company (including the Holders of
Senior Debt Securities), to participate in any distribution of the assets
of any subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed
money secured by a pledge, lien or other encumbrance (except for certain
liens specifically permitted by the Senior Indenture) on the Voting Stock
owned directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge
with or into any other corporation, and the Company may sell, lease or
convey all or substantially all of its assets to any corporation, provided
that (i) the corporation (if other than the Company) formed by or resulting
from any such consolidation or merger or which shall have received such
assets shall be a corporation organized and existing under the laws of the
United States of America or a state thereof and shall assume payment of the
principal of (and premium, if any) and interest on the Senior Debt
Securities and the performance and observance of all of the covenants and
conditions of the Senior Indenture to be performed or observed by the
Company, and (ii) the Company or such successor corporation, as the case
may be, shall not immediately thereafter be in default under the Senior
Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by
the Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt
12
<PAGE>
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any Senior Debt Security; (e) reduce the
percentage in principal amount of the Outstanding Senior Debt Securities of
any series, the consent of whose Holders is required to modify or amend the
Indenture; or (f) modify the foregoing requirements or reduce the
percentage of Outstanding Senior Debt Securities necessary to waive any
past default to less than a majority. No modification or amendment of the
Subordinated Indenture or any Subsequent Indenture for Subordinated Debt
Securities may adversely affect the rights of any holder of Senior
Indebtedness without the consent of such Holder. Except with respect to
certain fundamental provisions, the Holders of at least a majority in
principal amount of Outstanding Senior Debt Securities of any series may,
with respect to such series, waive past defaults under the Indenture and
waive compliance by the Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of
Default with respect to Senior Debt Securities of any series: (a) default
in the payment of any interest or Additional Amounts payable on any Senior
Debt Security of that series when due, continued for 30 days; (b) default
in the payment of any principal or premium, if any, on any Senior Debt
Security of that series when due; (c) default in the deposit of any sinking
fund payment, when due, in respect of any Senior Debt Security of that
series; (d) default in the performance of any other covenant of the Company
contained in the Indenture for the benefit of such series or in the Senior
Debt Securities of such series, continued for 60 days after written notice
as provided in the Senior Indenture; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default provided
with respect to Senior Debt Securities of that series. The Trustee or the
Holders of 25% in principal amount of the Outstanding Senior Debt
Securities of that series may declare the principal amount (or such lesser
amount as may be provided for in the Senior Debt Securities of that series)
of all Outstanding Senior Debt Securities of that series and the interest
due thereon and Additional Amounts payable in respect thereof, if any to be
due and payable immediately if an Event of Default with respect to Senior
Debt Securities of such series shall occur and be continuing at the time of
such declaration. At any time after a declaration of acceleration has been
made with respect to Senior Debt Securities of any series but before a
judgment or decree for payment of money due has been obtained by the
Trustee, the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those
due as a result of acceleration) have been made and all Events of Default
have been remedied or waived. Any Event of Default with respect to Senior
Debt Securities of any series may be waived by the Holders of a majority in
principal amount of all Outstanding Senior Debt Securities of that series,
except in a case of failure to pay principal or premium, if any, or
interest or Additional Amounts payable on any Senior Debt Security of that
series for which payment had not been subsequently made or in respect of a
covenant or provision which cannot be modified or amended without the
consent of the Holder of each Outstanding Senior Debt Security of such
series affected.
The Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a
statement as to the fulfillment by the Company of all of its obligations
under the Senior Indenture.
13
<PAGE>
EXPERTS
The consolidated financial statements and related financial
statement schedules of the Company and its subsidiaries included or
incorporated by reference in the Company's 1994 Annual Report on Form 10-K
and incorporated by reference in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
incorporated by reference herein. The Selected Financial Data under the
captions "Operating Results", "Financial Position" and "Common Share Data"
for each of the five years in the period ended December 30, 1994 included
in the 1994 Annual Report to Stockholders of the Company and incorporated
by reference herein, has been derived from consolidated financial
statements audited by Deloitte & Touche LLP, as set forth in their reports
incorporated by reference herein. Such consolidated financial statements
and related financial statement schedules, and such Selected Financial Data
incorporated by reference in this Prospectus and the Registration Statement
of which this Prospectus is a part, have been included or incorporated
herein by reference in reliance upon such reports of Deloitte & Touche LLP
given upon their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
14
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
CONSTANT MATURITY U.S. TREASURY YIELD INCREASE WARRANTS,
EXPIRING AUGUST 25, 1995
On February 3, 1994, Merrill Lynch & Co., Inc. (the "Company") issued
1,800,000 Constant Maturity U.S. Treasury Yield Increase Warrants, Expiring
August 25, 1995 (the "Warrants"). Each Warrant will entitle the Holder thereof
to receive from the Company a payment, if any, (the "Cash Settlement Value") on
August 25, 1995 (the "Expiration Date"), or on such earlier date as described
herein, based upon the increase in the CMT Yield. The CMT Yield is the yield to
maturity on U.S. Treasury securities with a constant maturity of five years as
more fully described herein. The Cash Settlement Value will equal the greater of
(i) U.S. $100 x 4 x (Spot Yield - Strike Yield) and (ii) zero. The "Strike
Yield" equals 5.03%. The "Spot Yield" will equal the CMT Yield on the Exercise
Date, as determined by the Calculation Agent. The Warrants will be automatically
exercised on the earlier of the fifth New York Business Day immediately
preceding August 25, 1995 or the New York Business Day immediately preceding the
date of occurrence of certain events in bankruptcy, insolvency or reorganization
involving the Company or the date of their earlier expiration upon delisting
from, or permanent suspension from trading on, the American Stock Exchange
unless the Warrants are simultaneously accepted for trading pursuant to the
rules of another Self-Regulatory Organization (as defined herein). The Warrants
are not exercisable at the option of the Holder. See "Description of the
Warrants".
The Warrants involve a high degree of risk, including the risk of expiring
worthless unless the CMT Yield increases. Investors therefore should be prepared
to sustain a total loss of the purchase price of their Warrants, and are advised
to carefully consider the information under "Risk Factors Relating to the
Warrants", "Description of the Warrants" and "Description of the Warrants--
Automatic Exercise Prior to the Expiration Date".
THE WARRANTS HAVE BEEN LISTED ON THE AMERICAN STOCK EXCHANGE UNDER THE
SYMBOL "YIW.WS".
_______________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________________________________
This Prospectus has been prepared in connection with the Securities and is
to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Securities.
MLPF&S may act as principal or agent in such transactions. The Securities may
be offered on a national securities exchange in the event the particular issue
of Securities has been listed on such exchange, or off such exchange in
negotiated transactions, or otherwise. Sales will be made at prices related to
prevailing prices at the time of sale. The distribution of the Warrants will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
---------------
Merrill Lynch & Co.
---------------
The date of this Prospectus is , 1995.
<PAGE>
The Commissioner of Insurance of The State of North Carolina has
not approved or disapproved the offering of the Securities made hereby nor
has the Commissioner passed upon the accuracy or adequacy of this
Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended
December 30, 1994, Quarterly Reports on Form 10-Q for the periods ended
March 31, 1995 and June 30, 1995, and Current Reports on Form 8-K dated
January 12, 1995, January 23, 1995, February 8, 1995, February 9, 1995,
March 3, 1995, March 9, 1995, April 18, 1995, May 2, 1995, May 23, 1995,
July 18, 1995, July 21, 1995, August 1, 1995, and August 2, 1995 filed
pursuant to Section 13 of the Exchange Act, are hereby incorporated by
reference into this Prospectus.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the maturity of the Warrants shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM
THIS PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH
PERSON, A COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY
INCORPORATED BY REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY
REFERENCE INTO THIS PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE
DIRECTED TO MR. GREGORY T. RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100
CHURCH STREET, 12TH FLOOR, NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER
(212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stocks dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
CERTAIN IMPORTANT INFORMATION CONCERNING THE WARRANTS
A Holder will receive a cash payment on the Expiration Date only if
the Warrants have a Cash Settlement Value in excess of zero on the Exercise
Date. The Spot Yield determined on the Exercise Date will establish whether
the Warrants have a positive Cash Settlement Value on the Expiration Date.
The Warrants may be "out-of-the-money" (i.e., their Cash Settlement Value
will be zero) when initially sold and the Warrants will be "in-the-money"
(i.e., their Cash Settlement Value will exceed zero) only if the Spot Yield
is greater than 5.03%. If the Spot Yield is equal to or less than 5.03%,
the Warrant will expire worthless and the Holder will have sustained a
total loss of the purchase price of such Warrant. Investors therefore
should be prepared to sustain a total loss of the purchase price of their
Warrants.
3
<PAGE>
RISK FACTORS RELATING TO THE WARRANTS
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF
EXPIRING WORTHLESS. INVESTORS THEREFORE SHOULD BE PREPARED TO SUSTAIN A
TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS. IT IS SUGGESTED THAT
INVESTORS CONSIDERING PURCHASING THE WARRANTS BE EXPERIENCED WITH RESPECT
TO OPTIONS ON SECURITIES AND OPTION TRANSACTIONS AND REACH AN INVESTMENT
DECISION ONLY AFTER CAREFULLY CONSIDERING ALL THE RISK FACTORS SET FORTH IN
THIS SECTION OF THIS PROSPECTUS, THE SUITABILITY OF THE WARRANTS IN LIGHT
OF THEIR PARTICULAR CIRCUMSTANCES AND ALL THE OTHER INFORMATION SET FORTH
IN THIS PROSPECTUS.
Exercise of the Warrants. The Warrants will be automatically exercised on
the Exercise Date and are not exercisable at the option of the Holder.
Automatic Exercise of the Warrants upon Delisting. In the event that the
Warrants are delisted from, or permanently suspended from trading on, the
American Stock Exchange and the Warrants are not simultaneously accepted
for trading pursuant to the rules of another self-regulatory organization
(a "Self-Regulatory Organization") that are filed with the Securities and
Exchange Commission under the Securities Act of 1934, as amended, the
Warrants will expire on the date such delisting or trading suspension
becomes effective and will be automatically exercised on the New York
Business Day immediately preceding the date of such early expiration. At
the time of such automatic exercise, the Warrants may be out-of-the-money
such that the Cash Settlement Value will equal zero.
Certain Factors Affecting the Value of the Warrants. The Cash Settlement
Value of the Warrants at any time prior to expiration is typically expected
to be less than the Warrants' trading value at that time. The difference
between the trading value and the Cash Settlement Value will reflect a
number of factors, including a "time value" for the Warrants. The "time
value" of the Warrants will depend upon the length of the period remaining
to expiration, among other factors. The expiration date of the Warrants
will be accelerated should the Warrants be delisted or should their trading
on the American Stock Exchange be suspended permanently unless the Warrants
simultaneously are accepted for trading pursuant to the rules of another
Self-Regulatory Organization. Any such acceleration would result in the
total loss of any otherwise remaining "time value" and could occur when the
Warrants are out-of-the-money, thus resulting in total loss of the purchase
price of the Warrants. See "Description of the Warrants-Automatic Exercise
Prior to the Expiration Date". Before exercising or selling Warrants,
Holders should carefully consider the trading value of the Warrants, the
value of the CMT Yield and probable range of Cash Settlement Values and any
related transaction costs.
There can be no assurance as to how the Warrants will trade in the
secondary market or whether such market will be liquid. The trading value
of a Warrant is expected to be dependent upon a number of complex
interrelated factors, including those listed below. The expected effect on
the trading value of a Warrant of each of the factors listed below,
assuming in each case that all other factors are held constant, is as
follows:
(1) The CMT Yield. If the CMT Yield increases relative to the Strike
Yield, the trading value of a Warrant is expected to increase. If the CMT
Yield decreases relative to the Strike Yield, the trading value of a
Warrant is expected to decrease.
(2) The volatility of the CMT Yield. If the volatility of the CMT
Yield increases, the trading value of a Warrant is expected to increase.
If such volatility decreases, the trading value of a Warrant is expected
to decrease.
(3) The general level of interest rates in the United States. If the
general level of interest rates in the United States increases, the
trading value of a Warrant is expected to increase. If the general level
of interest rates in the United States decreases, the trading value of a
Warrant is expected to decrease.
4
<PAGE>
(4) The time remaining to the expiration date of the Warrants. As the
time remaining to the expiration date of the Warrants decreases, the
trading value of a Warrant is expected to decrease.
As noted above, these hypothetical scenarios are based on the assumption
that all other factors are held constant. In reality, it is unlikely that
only one factor would change in isolation, since changes in one factor
usually cause, or result from, changes in others. Some of the factors
referred to above are, in turn, influenced by the political and economic
factors discussed below.
Warrants Not Standardized Options Issued by the Options Clearing
Corporation. Each Warrant constitutes an option having a value based upon
one or more United States Treasury securities, as calculated in the CMT
Yield. However, the Warrants are not standardized options of the type
issued by the Options Clearing Corporation (the "OCC"), a clearing agency
regulated by the Securities and Exchange Commission. For example, unlike
purchasers of OCC standardized options who have the credit benefits of
guarantees and margin and collateral deposits by OCC clearing members to
protect the OCC from a clearing member's failure, purchasers of Warrants
must look solely to the Company for performance of its obligations to pay
the Cash Settlement Value on the exercise of Warrants. Further, the market
for the Warrants is not expected to be generally as liquid as the market
for some OCC standardized options.
The Warrants are unsecured contractual obligations of the Company and
will rank on a parity with the Company's other unsecured contractual
obligations and with the Company's unsecured and unsubordinated debt.
However, since the Company is a holding company, the right of the Company,
and hence the right of creditors of the Company (including Holders of the
Warrants), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to the Company are restricted by net capital requirements
under the Securities Exchange Act of 1934, as amended, and under rules of
certain exchanges and other regulatory bodies.
General Risk Considerations. Options and warrants provide opportunities
for investment and pose risks to investors as a result of fluctuations in
the value of the underlying investment. In general, certain of the risks
associated with the Warrants are similar to those generally applicable to
other options or warrants of private corporate issuers.
The purchaser of a Warrant may lose his entire investment. This risk
reflects the nature of a Warrant as an asset which tends to decline in
value over time and which may, depending on the CMT Yield as compared to
the Strike Yield, become worthless when it expires. Assuming all other
factors are held constant, the more a Warrant is out-of-the-money and the
shorter its remaining term to expiration, the greater the risk that a
purchaser of the Warrant will lose all of his investment. This means that
the purchaser of a Warrant who does not sell it in the secondary market
will necessarily lose his entire investment in the Warrant if it expires
when the Spot Yield is less than or equal to the Strike Yield.
If the CMT Yield does not increase relative to the Strike Yield to an
extent sufficient to cover an investor's cost of the Warrant (i.e., the
purchase price plus transaction costs, if any) before the Warrant expires,
the investor will lose all or a part of his investment in the Warrant upon
expiration.
The CMT Yield is derived from United States Treasury securities. The
value of any debt security, including Treasury securities, may be affected
by complex political and economic factors, including the rate of inflation,
growth of gross national product and balance of payments for the United
States.
The AMEX requires that Warrants be sold only to investors with options
approved accounts and requires that its members and member organizations
and registered employees thereof make certain suitability determinations
5
<PAGE>
before recommending transactions in Warrants. It is suggested that
investors considering purchasing the Warrants be experienced with respect
to options on securities and option transactions and understand the risks
of transactions such as the Warrants and reach an investment decision only
after carefully considering the suitability of the Warrants in light of
their particular circumstances. The Warrants are not suitable for persons
solely dependant upon a fixed income, for retirement plan accounts or for
accounts under the Uniform Gift to Minors Act. INVESTORS SHOULD BE
PREPARED TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS.
DESCRIPTION OF THE WARRANTS
GENERAL
An aggregate of 1,800,000 Warrants were issued. The Warrants were issued
under a Warrant Agreement (the "Warrant Agreement"), dated as of February
3, 1994, between the Company and Citibank, N.A., as Warrant Agent (the
"Warrant Agent"). The following statements with respect to the Warrants are
summaries of the detailed provisions of the Warrant Agreement, the form of
which is filed as an exhibit to the Registration Statement. Wherever
particular provisions of the Warrant Agreement or terms defined therein are
referred to, such provisions or definitions are incorporated by reference
as a part of the statements made, and the statements are qualified in their
entirety by such reference.
A Warrant will not require, or entitle, a Holder to sell or purchase a
U.S. Treasury security to or from the Company. The Company will make only a
cash settlement, if any, with respect to the Warrants.
The Warrants will expire on August 25, 1995 (the "Expiration Date") or on
such earlier date as described under "Exercise of Warrants" and "Automatic
Exercise Prior to the Expiration Date". The Warrants will be automatically
exercised on the Exercise Date, as set forth under "Exercise of Warrants",
and are not exercisable at the option of the Holder. The term "New York
Business Day", as used herein, means any day other than a Saturday or a
Sunday or a day on which commercial banks in The City of New York are
required or authorized by law or executive order to be closed.
The Warrants will be unsecured contractual obligations of the Company and
will rank on a parity with the Company's other unsecured contractual
obligations and with the Company's unsecured and unsubordinated debt.
However, since the Company is a holding company, the right of the Company,
and hence the right of creditors of the Company (including Holders of the
Warrants), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to the Company are restricted by net capital requirements
under the Securities Exchange Act of 1934, as amended, and under rules of
certain exchanges and other regulatory bodies.
CASH SETTLEMENT VALUE
The Cash Settlement Value of a Warrant will be determined on the Exercise
Date as the amount which is the greater of:
(i) $100 x 4 x (Spot Yield - Strike Yield), and
(ii) $0
6
<PAGE>
The "Strike Yield" equals 5.03%. The "Spot Yield" will be determined on
the Exercise Date by Merrill Lynch, Pierce, Fenner & Smith Incorporated
(the "Calculation Agent"), an affiliate of the Company. The "Spot Yield
will be determined as follows:
(i) The Spot Yield will equal the rate which appears on Telerate Page
7052, "WEEKLY AVG YIELDS ON TREASURY CONSTANT MATURITIES ", under the
column entitled "5 YR", which appears as of 2:30 P.M., New York time, on
the Exercise Date. "Telerate Page 7052" means the display designated as
page 7052 on the Dow Jones Telerate Service (or such page as may replace
page 7052 on that service). The rate which appears on Telerate Page 7052
under the column entitled "5 YR" is the rate described in paragraph (ii)
below published in the most recent H.15(519) (as defined below).
(ii) If the Spot Yield as described in clause (i) is not available by
2:30 P.M., New York City time, on the Exercise Date, the Spot Yield will
equal the one-week average yield on 5-year United States Treasury
securities at "constant maturity", as published in the most recent
H.15(519) available on the Exercise Date, in the column "Week Ending" for
the most recent date opposite the heading "Treasury constant maturities,
5-Year." "H.15(519)" means the weekly statistical release designated as
such, published by the Board of Governors of the Federal Reserve System.
(iii) If the most recent H.15(519) available on the Exercise Date as
described in clause (ii) above was published more than fourteen calendar
days prior to the Exercise Date, the Spot Yield will equal the one-week
average yield on 5-year United States Treasury securities at "constant
maturity" as otherwise announced by the Federal Reserve Bank of New York
on the Exercise Date for the preceding week.
(iv) If the Spot Yield as described in clause (iii) is not announced
by 3:00 p.m., New York City time, on the Exercise Date, the Spot Yield
will be calculated by the Calculation Agent and will be a yield to
maturity (expressed as a bond equivalent and as a decimal rounded, if
necessary, to the nearest one hundred-thousandth of a percentage point
with five one-millionths of a percentage point rounded up, on the basis
of a year of 365 days, applied on a daily basis) based on the arithmetic
mean of the secondary market offer prices as of approximately 3:30 p.m.,
New York City time, on the Exercise Date of three leading primary United
States government securities dealers in The City of New York selected by
the Calculation Agent (from five such dealers 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 approximately five years, a
remaining term to maturity of not less than four years and in an amount
of $100,000,000. If three or four (and not five) of such dealers are
quoting as described in this clause (iv), then the Spot Yield will be
based on the arithmetic mean of the bid prices obtained and neither the
highest nor lowest of such quotations will be eliminated.
(v) If fewer than three dealers selected by the Calculation Agent are
quoting as described in clause (iv), the Spot Yield will be calculated by
the Calculation Agent and will be a yield to maturity (expressed as a
bond equivalent and as a decimal rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point with five one-millionths of
a percentage point rounded up, on the basis of a year of 365 days, and
applied on a daily basis) based on the arithmetic mean of the secondary
market offer prices as of approximately 3:30 p.m., New York City time, on
the Exercise Date of three leading primary United States government
securities dealers in The City of New York selected by the Calculation
Agent (from five such dealers 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 approximately ten years, a remaining term to
maturity closest to five years and in an amount of $100,000,000. If three
or four (and not five) of such dealers are quoting as described in this
clause, then the Spot Yield will be based on the arithmetic mean of the
bid prices obtained and neither the highest nor lowest of such quotes
will be eliminated. If two Treasury Notes with an original maturity of
approximately ten years have remaining terms to maturity equally close to
five years, the quotes for the Treasury Note with the shorter remaining
term to maturity will be used.
7
<PAGE>
The Cash Settlement Value will be rounded, if necessary, to the nearest
cent (with one-half cent being rounded upwards).
Set forth below is an illustration of the Cash Settlement Values of
Warrants on the Exercise Date based on the Strike Yield equal to 5.03% and
various hypothetical Spot Yields. The actual Cash Settlement Value of a
Warrant will depend entirely on the actual Spot Yield on the Exercise Date.
The illustrative Cash Settlement Values in the table do not reflect any
"time value" for a Warrant, which may be reflected in trading value, and
are not necessarily indicative of potential profit or loss, which are also
affected by purchase price and transaction costs.
<TABLE>
<CAPTION>
HYPOTHETICAL CASH SETTLEMENT
CMT SPOT YIELD VALUE OF A WARRANT
--------------- --------------------
<S> <C>
4.03%... $0.00
4.53%... $0.00
5.03%... $0.00
5.53%... $2.00
6.03%... $4.00
6.53%... $6.00
7.03%... $8.00
</TABLE>
A potential investor should review the historical performance of the CMT
Yield. The historical performance of the CMT Yield should not be taken as
an indication of future performance, and no assurance can be given that the
value of the CMT Yield will not decline and thereby cause the Cash
Settlement Value with respect to the Warrants to equal zero.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
The Warrants are represented by one registered global currency Warrant
(the "Global Warrant"). The Global Warrant has been deposited with, or on
behalf of, The Depository Trust Company, as Securities Depository, and
registered in the name of the Securities Depository or a nominee thereof.
Unless and until it is exchanged in whole or in part for Warrants in
definitive form in the limited circumstances described below, the Global
Warrant may not be transferred except as a whole by the Securities
Depository to a nominee of such Securities Depository or by a nominee of
such Securities Depository to such Securities Depository or another nominee
of such Securities Depository or by such Securities Depository or any such
nominee to a successor of such Securities Depository or a nominee of such
successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provision of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold 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 Securities
Depository's participants include securities brokers and dealers (including
the Underwriter), banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or their representatives)
own the Securities Depository. Access to the Securities Depository book-
entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly. Persons who are not
participants may beneficially own securities held by the Securities
Depository only through participants.
8
<PAGE>
Ownership of beneficial interests in the Warrants will be limited to
persons that have accounts with the Securities Depository ("Agent Members")
or persons that may hold interests through Agent Members. The Securities
Depository has advised the Company that upon the issuance of the Global
Warrant representing the Warrants, the Securities Depository will credit,
on its book-entry registration and transfer system, the Agent Members'
accounts with the respective principal amounts of the Warrants represented
by the Global Warrant. Ownership of beneficial interests in the Global
Warrant will be shown on, and the transfer of such ownership interests will
be effected only through, records maintained by the Securities Depository
(with respect to interests of Agent Members) and on the records of Agent
Members (with respect to interests of persons held through Agent Members).
The laws of some states may 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 own, transfer or pledge beneficial
interests in the Global Warrant.
So long as the Securities Depository, or its nominee, is the registered
owner of the Global Warrant, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the
Warrants represented by the Global Warrant for all purposes under the
Warrant Agreement. Except as provided below, owners of beneficial interests
in the Global Warrant will not be entitled to have the Warrants represented
by the Global Warrant registered in their names, will not receive or be
entitled to receive physical delivery of the Warrants in definitive form
and will not be considered the owners or Holders thereof under the Warrant
Agreement. Accordingly, each person owning a beneficial interest in the
Global Warrant must rely on the procedures of the Securities Depository
and, if such person is not an Agent Member, on the procedures of the Agent
Member through which such person owns its interest, to exercise any rights
of a Holder under the Warrant Agreement. 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 Warrant desires to give or take any action which a Holder is
entitled to give or take under the Warrant Agreement, the Securities
Depository would authorize the Agent Members holding the relevant
beneficial interests to give or take such action, and such Agent Members
would authorize beneficial owners owning through such Agent Members to give
or take such action or would otherwise act upon the instructions of
beneficial owners through them.
The Cash Settlement Value in exercise of Warrants registered in the name
of the Securities Depository or its nominee will be paid by the Warrant
Agent to the Agent Members or, in the case of delisting, to the Securities
Depository. None of the Company, the Warrant Agent or any other agent of
the Company or agent of the Warrant Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests or for supervising or reviewing
any records relating to such beneficial ownership interests. The Company
expects that the Warrant Agent, upon the receipt of payment of the Cash
Settlement Value in respect of the Global Warrant, will pay the relevant
Agent Member in an amount proportionate to its beneficial interest in the
Global Warrant and that such Agent Member will credit the accounts of the
beneficial owners of such Warrants. The Company expects that the Securities
Depository, in the case of delisting, upon receipt of payment of the Cash
Settlement Value in respect of the Global Warrant, will credit the accounts
of the Agent Members with payment in amounts proportionate to their
respective beneficial interests in the Global Warrant so delisted, as shown
on the records of the Securities Depository. The Company also expects that
payments by Agent Members to owners of beneficial interests in the Global
Warrant will be governed by standing customer instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Agent Members. It is suggested that purchasers of
Warrants with accounts at more than one brokerage firm effect transactions
in the Warrants, only through the brokerage firm or firms which hold that
purchaser's Warrants.
If the Securities Depository is at any time unwilling or unable to
continue as depository and a successor Securities Depository is not
appointed by the Company within 90 days or if the Company is subject to
certain events in bankruptcy, insolvency or reorganization, the Company
will issue Warrants in definitive form in exchange for the Global Warrant.
In addition, the Company may at any time determine not to have the Warrants
represented by the Global Warrant and, in such event, will issue Warrants
in definitive form in exchange for the Global Warrant.
9
<PAGE>
In any such instance, an owner of a beneficial interest in the Global
Warrant will be entitled to have a number of Warrants equivalent to such
beneficial interest registered in its name and will be entitled to physical
delivery of such Warrants in definitive form.
EXERCISE OF WARRANTS
The Warrants are not exercisable at the option of the Holder. The
Warrants will be automatically exercised on the fifth New York Business Day
immediately preceding the Expiration Date or, if an Early Expiration Date
occurs, the New York Business Day immediately preceding the Early
Expiration Date (the "Exercise Date").
The Warrant Agent will obtain the Spot Yield on the Exercise Date from
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Calculation
Agent"), an affiliate of the Company, and determine the Cash Settlement
Value of the Warrants. The Warrant Agent will pay the Cash Settlement Value
of a Warrant to the Securities Depository by check on the Expiration Date
and, if August 25, 1995 is not a New York Business Day, on the next
succeeding New York Business Day. If an Early Expiration Date occurs, as
described below under "Automatic Exercise Prior to the Expiration Date",
the Warrant Agent will pay the Cash Settlement Value of a Warrant to the
Securities Depository by check on the fifth New York Business Day following
the Early Expiration Date (as defined below). See "Description of the
Warrants-Book-Entry Procedures and Settlement".
LISTING OF THE WARRANTS
The Warrants have been listed on the American Stock Exchange under the
symbol "YIW.WS". The American Stock Exchange will expect to cease trading
the Warrants on such Exchange as of the close of business on the Expiration
Date.
AUTOMATIC EXERCISE PRIOR TO THE EXPIRATION DATE
In the event that the Warrants are delisted from, or permanently
suspended from trading on, the American Stock Exchange and the Warrants are
not simultaneously accepted for trading pursuant to the rules of another
self-regulatory organization whose rules are filed with the Securities and
Exchange Commission (a "Self-Regulatory Organization") under the Securities
Act of 1934, as amended, the Warrants will expire on the date such
delisting or trading suspension becomes effective (an "Early Expiration
Date") and the Warrants will be automatically exercised on the New York
Business Day immediately preceding such Early Expiration Date, and the Cash
Settlement Value, if any (determined as provided under "Exercise of
Warrants"), of such automatically exercised Warrants will be paid on the
fifth New York Business Day following such Early Expiration Date.
Settlement shall otherwise occur as described under "Book-Entry Procedures
and Settlement". The Company will notify Holders as soon as practicable of
such delisting or trading suspension. The Company has agreed in the Warrant
Agreement that it will not seek delisting of the Warrants or suspension of
their trading on the American Stock Exchange.
The Warrants may also expire on the date of occurrence of certain events
in bankruptcy, insolvency or reorganization involving the Company (any such
date also being an "Early Expiration Date") and the Warrants will be
automatically exercised as of the New York Business Day immediately
preceding such Early Expiration Date. The Cash Settlement Value, if any
(determined as provided under "Exercise of Warrants"), of such
automatically exercised Warrants will be due and payable on the fifth New
York Business Day following such Early Expiration Date. Settlement will
otherwise occur as described under "Book-Entry Procedures and Settlement".
MODIFICATION
The Warrant Agreement and the terms of the Warrants may be amended by the
Company and the Warrant Agent, without the consent of the Holders of any
Warrants, for the purpose of curing any ambiguity, or of curing, correcting
or supplementing any defective or inconsistent provision contained therein,
or in any other manner which
10
<PAGE>
the Company may deem necessary or desirable and which will not materially
and adversely affect the interests of the Holders of the Warrants.
The Company and the Warrant Agent also may modify or amend the Warrant
Agreement and the terms of the Warrants, with the consent of the Holders of
not less than a majority in number of the then outstanding Warrants
affected, provided that no such modification or amendment that changes the
Spot Yield so as to adversely affect the Holder, shortens the period of
time remaining to the Expiration Date or otherwise materially and adversely
affects the exercise rights of the Holders of the Warrants or reduces the
percentage of the number of outstanding Warrants, the consent of whose
Holders is required for modification or amendment of a Warrant Agreement or
the terms of Warrants may be made without the consent of the Holders of
Warrants affected thereby.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other corporation,
and the Company may sell, lease or convey all or substantially all of its
assets to any corporation, provided that the corporation (if other than the
Company) formed by or resulting from any such consolidation or merger or
which shall have received such assets shall be a corporation organized and
existing under the laws of the United States of America or a state thereof
and shall assume payment of the Cash Settlement Value with respect to all
unexercised Warrants, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of the
Warrant Agreement and of the Global Warrant to be performed by the Company.
CMT YIELD
GENERAL
U.S. Treasury securities, including those used to calculate the CMT
Yield, are direct obligations of the United States government and carry the
full faith and credit of the United States of America. The Warrants,
however, are solely the obligation of the Company and are not backed by the
full faith and credit of the United States. If the CMT Yield is determined
using yields reported on Telerate Page 7052, in H.15(519) or as reported by
the Federal Reserve Bank of New York as described in "Description of the
Warrants-Cash Settlement Value", the CMT Yield will be a one-week average
yield on 5-year United States Treasury securities at "constant maturity"
(the "Weekly CMT Yield"). Yields on Treasury securities at "constant
maturity" used to calculate the Weekly CMT Yield are interpolated from the
daily yield curve. This curve, which relates the yield on a security to its
time to maturity, is based upon the market yields on actively traded
Treasury securities in the over-the-counter market. The constant maturity
yield values are derived from the yield curve at fixed maturities. This
method permits estimation of the yield for a five year maturity, even if no
outstanding security has exactly five years remaining to maturity. If the
Weekly CMT Yield cannot be calculated, the CMT Yield will be determined
based on the yield to maturity of certain Treasury securities on the
Exercise Date based on secondary market offer prices of certain dealers as
more fully described in "Description of the Warrants-Cash Settlement
Value". The value of the CMT Yield during the term of the Warrants will
likely not be calculated based on one specific Treasury security.
A potential investor should review the historical performance of the CMT
Yield. The historical performance of the CMT Yield should not be taken as
an indication of future performance, and no assurance can be given that the
CMT Yield will increase sufficiently to cause the Cash Settlement Value
with respect to the Warrants to be greater than zero.
11
<PAGE>
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
12
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
AMEX HONG KONG 30 INDEX/*/ CALL WARRANTS WITH OPTIONAL RESET,
EXPIRING DECEMBER 15, 1995
-----------
On December 27, 1993, Merrill Lynch & Co., Inc. (the "Company") issued
1,600,000 AMEX Hong Kong 30 Index Call Warrants with Optional Reset, Expiring
December 15, 1995 (the "Warrants"). Each Warrant will entitle the Holder
thereof to receive from the Company upon exercise (including automatic exercise)
an amount in U.S. dollars computed by reference to increases in the AMEX Hong
Kong 30 Index (the "Index"). Such amount (the "Cash Settlement Value") will
equal the product of $25 multiplied by the Percentage Change in the Index. The
Cash Settlement Value cannot be less than zero. The "Percentage Change" will
equal (i) the Index Spot Price (as defined herein), minus the Index Strike
Price, divided by (ii) the Index Strike Price. The Index Strike Price equals
528.64.
The Warrants are exercisable at the option of the Holder until 1:00 p.m.,
New York City time, on the second New York Business Day immediately preceding
the earlier of their expiration on December 15, 1995 (the "Expiration Date"),
cancellation or the date of their earlier expiration upon delisting from, or
permanent suspension of trading on, the American Stock Exchange (the "AMEX")
unless the Warrants are simultaneously accepted for trading pursuant to the
rules of another Self-Regulatory Organization (as defined herein). Any Warrant
not exercised at or before 1:00 p.m., New York City time, on the second New York
Business Day immediately preceding the Expiration Date or the date of their
earlier expiration will be deemed automatically exercised on the first New York
Business Day preceding the Expiration Date or, in the case of early expiration,
on the New York Business Day prior to the Early Expiration Date (as defined
herein). A Holder may exercise no fewer than 100 Warrants at any one time,
except in the case of automatic exercise. See "Description of the Warrants". The
Warrants will be in book-entry form and, accordingly, no beneficial owner of
Warrants will be entitled to receive a certificate representing such Warrants.
The Warrants involve a high degree of risk, including the risk of expiring
worthless unless the Index increases so that the Index Spot Price exceeds the
Index Strike Price. Investors therefore should be prepared to sustain a total
loss of the purchase price of their Warrants, and are advised to carefully
consider the information under "Risk Factors Relating to the Warrants",
"Description of the Warrants", "Description of the Warrants-Delisting of the
Warrants" and "The Index".
The Warrants have been listed on the American Stock Exchange under the
symbol "MHW.WS".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
This Prospectus has been prepared in connection with the Securities and is
to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly-owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Securities.
MLPF&S may act as principal or agent in such transactions. The Securities may
be offered on a national securities exchange in the event the particular issue
of Securities has been listed on such exchange, or off such exchange in
negotiated transactions, or otherwise. Sales will be made at prices related to
prevailing prices at the time of sale. The distribution of the Warrants will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
------------------------
Merrill Lynch & Co.
------------------------
/*/The use and reference to the term "AMEX Hong Kong 30 Index" herein has been
consented to by the American Stock Exchange. The "AMEX Hong Kong 30 Index" is a
service mark of the American Stock Exchange.
The date of this Prospectus is , 1995.
<PAGE>
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Securities made hereby nor has
the Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
30, 1994, Quarterly Reports on Form 10-Q for the periods ended March 31,
1995 and June 30, 1995, and Current Reports on Form 8-K dated January 12,
1995, January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995,
March 9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995,
July 21, 1995, August 1, 1995, and August 2, 1995 filed pursuant to Section
13 of the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the maturity of the Warrants shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stocks dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
CERTAIN IMPORTANT INFORMATION CONCERNING THE WARRANTS
A Holder will receive a cash payment upon exercise only if the
Warrants have a Cash Settlement Value in excess of zero on the Valuation
Date. The Warrants may be "out-of-the-money" (i.e., their Cash Settlement
Value will be zero) when initially sold and the Warrants will be "in-the-
money" (i.e., their Cash Settlement Value will exceed zero) on the
Valuation Date only if, as of such date, the value of the Index increases
so that the Index Spot Price is above the Index Strike Price. An increase
in the level of the Index will result in a greater Cash Settlement Value,
and a decrease in the level of the Index will result in a lesser or zero
Cash Settlement Value. If a Warrant is not exercised prior to its
expiration and, on the Valuation Date with respect to its expiration, the
value of the Index is less than or equal to the Index Strike Price, the
Warrant will expire worthless and the Holder will have sustained a total
loss of the purchase price of such Warrant. Investors therefore should be
prepared to sustain a total loss of the purchase price of their Warrants.
3
<PAGE>
RISK FACTORS RELATING TO THE WARRANTS
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF
EXPIRING WORTHLESS. INVESTORS THEREFORE SHOULD BE PREPARED TO SUSTAIN A
TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS. IT IS SUGGESTED THAT
INVESTORS CONSIDERING PURCHASING THE WARRANTS BE EXPERIENCED WITH RESPECT
TO OPTIONS AND OPTION TRANSACTIONS AND UNDERSTAND THE RISKS OF STOCK INDEX
TRANSACTIONS AND REACH AN INVESTMENT DECISION ONLY AFTER CAREFULLY
CONSIDERING ALL THE RISK FACTORS SET FORTH IN THIS SECTION OF THIS
PROSPECTUS, THE SUITABILITY OF THE WARRANTS IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES AND ALL THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS.
Minimum Exercise Amount. Except for cases of automatic exercise, a
Holder must tender at least 100 Warrants at any one time in order to
exercise Warrants. Thus, except in cases of automatic exercise or exercise
upon cancellation of the Warrants, Holders with fewer than 100 Warrants
will need either to sell their Warrants or to purchase additional Warrants,
incurring transaction costs in either case, in order to realize proceeds
from their investment. Furthermore, such Holders incur the risk that there
may be differences between the trading value of the Warrants and the Cash
Settlement Value of such Warrants. It is not possible to predict the price
at which the Warrants will trade in the secondary market or whether such
market will be liquid or illiquid.
Maximum Exercise Amount. All exercises of Warrants (other than on
automatic exercise) are subject, at the Company's option, to the limitation
that not more than 20% of the Warrants originally issued may be exercised
on any Exercise Date and not more than 10% of the Warrants originally
issued may be exercised by or on behalf of any Warrantholder, either
individually or in concert with any other Warrantholder, on any Exercise
Date. If any New York Business Day would otherwise, under the terms of the
Warrant Agreement, be the Exercise Date in respect to more than 20% of the
Warrants originally issued, then at the Company's election 20% of the
Warrants originally issued (provided, however, that no more than 10% of the
Warrants originally issued shall be exercised for the account of any
Warrantholder) shall be exercised on such Exercise Date (selected by the
Warrant Agent on a pro rata basis, but if, as a result of such pro rata
selection, any registered holders of Warrants would be deemed to have
exercised less than 100 Warrants, the Warrant Agent shall first select an
additional amount of such holders' Warrants so that no holder shall be
deemed to have exercised less than 100 Warrants), and the remainder of such
Warrants shall be deemed exercised on the following New York Business Day.
As a result of any such postponed exercise, Warrantholders will receive a
Cash Settlement Value determined as of a date later than the otherwise
applicable Valuation Date. In any such case, as a result of any such
postponement, the Cash Settlement Value actually received by Warrantholders
may be lower than the otherwise applicable Cash Settlement Value if the
Valuation Date of the Warrants had not been postponed.
Offering Price of Warrants. The initial public offering price of the
Warrants is in excess of the price a commercial user of or dealer in
options on the Index might pay for a comparable option involving
significantly larger amounts.
Time Lag After Exercise Instructions Given. In the case of any
exercise of Warrants, there will be a time lag between the time a Holder
gives instructions to exercise and the time the Index Spot Price relating
to such exercise is determined. Therefore, a Holder will not be able to
determine, at the time of exercise of a Warrant, the Index Spot Price that
will be used in calculating the Cash Settlement Value of such Warrant (and
will thus be unable to determine such Cash Settlement Value). The delay
will, at a minimum, amount to almost an entire day and could be much longer
(e.g., an exercise notice received by the Warrant Agent after 1:00 p.m.
Friday would generally result in the Index Spot Price being determined the
following Tuesday). Any downward movement in the level of the Index between
the time a Holder of a Warrant exercises a Warrant and the time the Index
Spot Price for such exercise is determined will result in such holder
receiving a Cash Settlement Value that is less than the Cash Settlement
Value anticipated by such holder based on the closing level of the Index
most recently reported prior to exercise. A Holder that has not exercised a
Warrant prior to the second New York Business Day preceding the Expiration
Date will, pursuant to the provision for automatic exercise, have the Index
Spot Price with respect to such Warrant determined on the Index Business
Day following the deemed exercise day. The value of the Index may change
significantly during any such period, and such movements could adversely
affect the Cash Settlement Value of the Warrants being exercised.
4
<PAGE>
Further delay may occur if a Market Disruption Event or Extraordinary
Event has occurred, in which case the Cash Settlement Value in respect of
exercised Warrants will be calculated as of the next succeeding Index
Business Day on which there is no Market Disruption Event or Extraordinary
Event. If the Calculation Agent determines that on a Valuation Date a
Market Disruption Event or Extraordinary Event has occurred, the Valuation
Date shall be postponed to the first succeeding Index Business Day on which
no Market Disruption Event or Extraordinary Event occurs; provided that, if
the Valuation Date has not occurred on or prior to the fifth Index Business
Day following an Exercise Date because of Market Disruption Events, such
fifth Index Business Day shall be the Valuation Date regardless of whether
a Market Disruption Event has occurred on such day; provided further,
however, that if an Extraordinary Event has occurred and is continuing, and
if the Extraordinary Event is expected by the Company to continue, the
Company may immediately cancel the Warrants as described below under
"Description of the Warrants-Extraordinary Events and Market Disruption
Events".
Time Difference. The Index is calculated on the basis of price
quotations for stocks underlying the Index from the Hong Kong Stock
Exchange. There will be a time difference between New York City time and
the local time in Hong Kong. To the extent that the AMEX is closed while
the Hong Kong Stock Exchange is open, significant movements in the value of
the Index may take place which will not be reflected in the last sale price
of a Warrant on the AMEX.
Automatic Exercise of the Warrants upon Delisting. In the event that
the Warrants are delisted from, or permanently suspended from trading on,
the AMEX and the Warrants are not simultaneously accepted for trading
pursuant to the rules of another self-regulatory organization (a "Self-
Regulatory Organization") that are filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, such
Warrants not previously exercised will expire on the date such delisting or
trading suspension becomes effective and will be deemed automatically
exercised on the New York Business Day prior to the date of such early
expiration. At the applicable Valuation Date with respect to such automatic
exercise, the Warrants may be out-of-the-money so that the Cash Settlement
Value would equal zero.
Certain Factors Affecting the Value of the Warrants. The Cash
Settlement Value of the Warrants at any time prior to expiration is
typically expected to be less than the Warrants' trading value at that
time. The difference between the trading value and the Cash Settlement
Value will reflect a number of factors, including a "time value" for the
Warrants. The "time value" of the Warrants will depend upon the length of
the period remaining to expiration and the length of the period remaining
to the Optional Reset Date, among other factors. If the Index Spot Price is
below or not sufficiently above the Initial Index Price on the Optional
Reset Date, then the trading value of the Warrants is expected to be less
than the initial public offering price, holding all other factors constant.
In such case, however, the trading value of the Warrants is expected to be
higher than the trading value which would have prevailed in the absence of
such Index Strike Price reset feature (the "Optional Reset"). The
expiration date of the Warrants will be accelerated should the Warrants be
delisted or should their trading on the AMEX be suspended permanently
unless the Warrants simultaneously are accepted for trading pursuant to the
rules of another Self-Regulatory Organization. Any such acceleration would
result in the total loss of any otherwise remaining "time value", and could
occur when the Warrants are out-of-the-money, thus resulting in total loss
of the purchase price of the Warrants. See "Description of the Warrants-
Delisting of the Warrants". Before exercising or selling Warrants, Holders
should carefully consider the trading value of the Warrants, the value of
the Index and probable range of Cash Settlement Values and any related
transaction costs.
Investors should also consider factors affecting the economies of Hong
Kong and China. See "The Index" and "Important Considerations Relating to
Hong Kong and China" below.
It is possible that the trading value of a Warrant may decline
significantly even if there is an increase in the value of the Index.
There can be no assurance as to how the Securities will trade in the
secondary market or whether such market will be liquid. The trading value
of a Warrant is expected to be dependent on the value of the Index Strike
Price and also upon a number of complex interrelated factors, including
those listed below. The expected theoretical
5
<PAGE>
effect on the trading value of a Warrant of each of the factors listed
below, assuming in each case that all other factors are held constant, is
as follows:
(1) The Index. If the value of the Index rises, the trading
value of a Warrant is expected to increase. If the value of the Index
decreases, the trading value of a Warrant is expected to decrease.
(2) The volatility of the Index. If the volatility of the Index
increases, the trading value of a Warrant is expected to increase. If
such volatility decreases, the trading value of a Warrant is expected
to decrease.
(3) The time remaining to the Expiration Date of the Warrants
and the Optional Reset Date. As the time remaining to the Expiration
Date and the Optional Reset Date decreases, the trading value of a
Warrant is expected to decrease.
(4) Interest rates in Hong Kong and the United States. In
general, if U.S. interest rates increase, the trading value of the
Warrants is expected to decrease. If U.S. interest rates decrease, the
trading value of the Warrants is expected to increase. If interest
rates in Hong Kong increase, the trading value of a Warrant is
expected to increase; however, increased Hong Kong interest rates may
adversely affect the economy of Hong Kong and, in turn, the Index, and
the trading value of a Warrant could then be expected to decrease. If
interest rates in Hong Kong decrease, the trading value of a Warrant
is expected to decrease; however, decreased Hong Kong interest rates
may positively affect the economy of Hong Kong and, in turn, the
Index, and the trading value of a Warrant could then be expected to
increase.
(5) Dividend rates in Hong Kong. If dividend rates on the
common stocks underlying the Index increase, the trading value of a
Warrant is expected to decrease; however, increased dividend rates may
positively affect the value of the Index, and the trading value of a
Warrant could then be expected to increase. If dividend rates on the
common stocks underlying the Index decrease, the trading value of a
Warrant is expected to increase; however, decreased dividend rates may
adversely affect the value of the Index, and the trading value of a
Warrant could then be expected to decrease.
(6) Hong Kong/U.S. dollar exchange rates. The Cash Settlement
Value is based on a given level of the Index and will not be affected
by changes in the Hong Kong/U.S. dollar exchange rate. However, a
number of economic factors, including the Hong Kong/U.S. dollar
exchange rate, could affect the value of the Underlying Stocks and,
therefore, the value of the Index.
As noted above, these hypothetical scenarios are based on the assumption
that all other factors are held constant. In reality, it is unlikely that
only one factor would change in isolation, because changes in one factor
usually cause, or result from, changes in others. Some of the factors
referred to above are, in turn, influenced by the political and economic
factors discussed below.
The Index. The stocks underlying the Index have been issued by
companies organized in Hong Kong. The prices of such Underlying Stocks will
be affected by foreign political, economic and other developments.
The Hong Kong Stock Exchange has adopted certain measures intended to
prevent any extreme short-term price fluctuations resulting from order
imbalances or market volatility. Where the Hong Kong Stock Exchange
considers it necessary for the protection of the investor or the
maintenance of an orderly market, it may at any time suspend dealings in
any securities or cancel the listing of any securities in such
circumstances and subject to such conditions as it thinks fit, whether
requested by the listed issuer or not. The Hong Kong Stock Exchange may
also do so when: (1) an issuer fails, in a manner which the Hong Kong Stock
Exchange considers material, to comply with the Hong Kong Stock Exchange
Listing Rules or its Listing Agreements or (2) the Hong Kong Stock Exchange
considers there are insufficient securities in the hands of the public; or
(3) the Hong Kong Stock Exchange considers that the listed issuer does not
have a sufficient level of operations or sufficient assets to warrant the
continued listing of the issuer's securities; or (4) the Hong Kong Stock
Exchange considers that the issuer or its business is no longer
6
<PAGE>
suitable for listing. Investors should also be aware that the Hong Kong
Stock Exchange may suspend the trading of individual stocks in certain
limited and extraordinary circumstances, until certain price-sensitive
information has been disclosed to the public. Since the stocks underlying
the Index are traded on the Hong Kong Stock Exchange, changes in the Index
may be limited by suspensions of trading generally or of one or more of the
stocks underlying the Index, which limitations may, in turn, adversely
affect the value of the Warrants.
Warrants Not Standardized Options Issued by the Options Clearing
Corporation. The Warrants are not standardized stock index options of the
type issued by the Options Clearing Corporation (the "OCC"), a clearing
agency regulated by the Securities and Exchange Commission. For example,
unlike purchasers of OCC standardized options who have the credit benefits
of guarantees and margin and collateral deposits by OCC clearing members to
protect the OCC from a clearing member's failure, purchasers of Warrants
must look solely to the Company for performance of its obligations to pay
the Cash Settlement Value or Alternative Settlement Value on the exercise
of Warrants. Further, the market for the Warrants is not expected to be
generally as liquid as the market for OCC standardized options.
The Warrants are unsecured contractual obligations of the Company and
will rank on a parity with the Company's other unsecured contractual
obligations and with the Company's unsecured and unsubordinated debt.
However, since the Company is a holding company, the right of the Company,
and hence the right of creditors of the Company (including Holders of the
Warrants), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to the Company are restricted by net capital requirements
under the Securities Exchange Act of 1934, as amended, and under rules of
certain exchanges and other regulatory bodies.
Important Considerations Relating to Hong Kong and China. Investors
should realize that the value of the Index, and therefore the potential
Cash Settlement Value or Alternative Settlement Amount as the case may be,
may be adversely affected by political, economic or social instability,
developments and changes in law or regulations particularly in Hong Kong
and the People's Republic of China ("China"). Certain of these factors are
discussed below.
In December 1984, Great Britain and China signed an agreement (the
"Sino-British Accord") under which Hong Kong will revert to Chinese
sovereignty effective July 1, 1997. Although China has committed by treaty
to preserve for 50 years the economic and social freedoms currently enjoyed
in Hong Kong, the continuation of the economic system in Hong Kong after
the reversion will be dependent on the Chinese government. Any increase in
uncertainty as to the future economic and political status of Hong Kong
could have a materially adverse effect on the economy of Hong Kong and the
Index.
The Sino-British Accord provides that the basic policies of China
regarding Hong Kong and the elaboration of these policies in the Sino-
British Accord will be stipulated by the National People's Congress of
China in a Basic Law of the Hong Kong Special Administrative Region (the
"Hong Kong SAR") (the "Basic Law"). The Basic Law was finalized in February
1990 and adopted by the National People's Congress on April 4, 1990. The
Basic Law provides that the Chief Executive of the Hong Kong SAR will be
recommended by a committee composed of Hong Kong residents representing a
broad spectrum of distinct constituencies, such as industry, labor and the
various professions, and appointed by the government of China. The power of
amendment of the Basic Law is vested in the National People's Congress of
China. The Basic Law provides that the Hong Kong dollar will remain the
legal tender in the Hong Kong SAR after the transfer of sovereignty. It
also provides that no exchange control policies will be applied in the Hong
Kong SAR and that the Hong Kong dollar will remain freely convertible.
It is not clear how future developments in Hong Kong and China may
affect the implementation of the Basic Law after the transfer of
sovereignty in 1997. As a result of this political and legal uncertainty,
the economic prospects of Hong Kong and the companies whose stocks comprise
the Index are uncertain. Accordingly, the Hong Kong Stock Exchange has
been, and can be expected to remain, highly volatile and sensitive to
adverse political
7
<PAGE>
developments with regard to Hong Kong's future and perceptions of actual or
potential political developments of that kind. For this reason, among
others, the Index and the value of the Warrants can also be expected to be
volatile.
China currently has Most Favored Nation ("MFN") trading status with
the United States. In May 1993, U.S. President Clinton renewed China's MFN
status for one year but set forth certain conditions to be met for renewal
beginning July 1994, including that the U.S. Secretary of State make a
recommendation to the President whether to extend China's MFN status. In
making this recommendation, the U.S. Secretary of State is not to recommend
extension unless he determines that extension will substantially promote
the freedom of emigration objectives of the U.S. Trade Act of 1974 and that
China is complying with the 1992 U.S. China bilateral agreement concerning
prison labor. The U.S. Secretary of State is also to determine whether
China has made significant progress overall with respect to certain human
rights matters. China believes that these conditions represent an
interference in China's internal affairs and is not appropriate or
permissible under existing agreements between the two countries. Loss of
China's MFN status would subject Chinese exports to the United States to
higher tariffs and could have a material adverse effect on China's economy.
Loss of MFN status or any friction resulting from the imposition of
conditions on China could also negatively impact the economy of Hong Kong.
Underlying Stocks. The performance of certain companies listed on the
Hong Kong Stock Exchange is linked to the economic climate of China. Any
downturn in economic growth or other negative developments affecting the
economic climate of China could have a materially adverse effect on the
value of the Index. In addition, the Hong Kong securities markets are
currently characterized by a high level of investment by and interest among
United States and other non-Hong Kong persons. Changes in the level of
investment or interest could have a materially adverse effect on the level
of the Index.
Although none of the companies whose stocks comprise the Underlying
Stocks is currently organized under the laws of China, the level of the
Index nonetheless can be affected by developments in China. China currently
indirectly influences political and economical developments in various
parts of Asia, including Hong Kong, and its influence is expected to
continue to grow. The government of China, a socialist state controlled by
the Communist Party of China, now permits private economic activities to a
certain extent. Although the government of China is actively seeking
foreign investment, and China has implemented a number of economic reforms
promoting private sector development, it has historically been
ideologically opposed to capitalism. Political, economic or social
instability in, and diplomatic and other developments associated with,
China could have a significant effect on economic conditions in Hong Kong
and on the market prices and liquidity of securities traded on the Hong
Kong Stock Exchange, including the Underlying Stocks. Moreover, many of the
issuers of the Underlying Stocks have substantial investments in China,
which investments could be adversely affected by political, economic,
market and other developments in or affecting China. Accordingly, adverse
political or economic developments in China could adversely affect the
level of the Index and thus the value of the Warrants.
Underlying Stocks representing approximately one-third of the market
capitalization of the Index (as of December 17, 1993) are companies engaged
in real estate asset management, development, leasing, property sales and
other related activities. Many factors may have an adverse impact on the
credit quality of these real estate companies and, indirectly, the Index.
Generally, these include economic recession, the cyclical nature of real
estate markets, overbuilding, changing demographics, changes in
governmental regulations (including tax laws and environmental, building,
zoning and sales regulations), increases in real estate taxes or costs of
material and labor, the inability to secure performance guarantees or
insurance as required, the unavailability of investment capital and the
inability to obtain construction financing or mortgage loans at rates
acceptable to builders and purchasers of real estate. Additional risks
include an inability to reduce expenditures associated with a property
(such as mortgage payments and property taxes) when rental revenue
declines, and possible loss upon foreclosure of mortgaged properties if
mortgage payments are not paid when due.
General Risk Considerations. Options and warrants provide
opportunities for investment and pose risks to investors as a result of
fluctuations in the value of the underlying investment. In general, certain
of the risks associated with the Warrants are similar to those generally
applicable to other options or warrants of private
8
<PAGE>
corporate issuers. However, unlike options or warrants on equities or debt
securities, which are traded primarily on the basis of the value of a
single underlying security, the trading value of a Warrant is likely to
reflect primarily the extent of the appreciation, if any, in the Index.
The purchaser of a Warrant may lose his entire investment. This risk
reflects the nature of a Warrant as an asset which tends to decline in
value over time and which may, depending on the relative value of the
Index, become worthless when it expires. Assuming all other factors are
held constant, the more a Warrant is out-of-the-money and the shorter its
remaining term to expiration, the greater the risk that a purchaser of the
Warrant will lose all of his investment. This means that the purchaser of a
Warrant who does not sell it in the secondary market or exercise it prior
to expiration will necessarily lose his entire investment in the Warrant if
it expires when the Index Spot Price is less than or equal to the Index
Strike Price.
The fact that Warrants may become valueless upon expiration means
that, in order to recover and realize a return upon his investment, a
purchaser of a Warrant must generally be correct about the direction,
timing and magnitude of anticipated changes in the value of the Index. If
the value of the Index does not increase to an extent sufficient to cover
an investor's cost of the Warrant (i.e., the purchase price plus
transaction costs, if any) before the Warrant expires, the investor will
lose all or a part of his investment in the Warrant upon expiration. The
Cash Settlement Value is based on a given level of the Index and will not
be affected by changes in the Hong Kong/U.S. dollar exchange rate. However,
a number of economic factors, including the Hong Kong/U.S. dollar exchange
rate, could affect the value of the Underlying Stocks and, therefore, the
value of the Index.
It is suggested that investors considering purchasing Warrants be
experienced with respect to options and option transactions and understand
the risks of stock index transactions and reach an investment decision only
after carefully considering, with their advisers, the suitability of the
Warrants in light of their particular circumstances. Warrants are not
suitable for persons solely dependent upon a fixed income, for retirement
plan accounts or for accounts under the Uniform Gift to Minors Act.
INVESTORS SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE
OF THEIR WARRANTS.
In the event that the Index is not published by the AMEX but is
published by another person not affiliated with the Company and acceptable
to the Calculation Agent, then the Index Spot Price for any date thereafter
will be determined based on the closing level of the Index as published by
such third party. If the AMEX or any third party discontinues publication
of the Index and publishes a successor or substitute index that the
Calculation Agent determines, in its sole discretion, to be comparable to
the Index (any such index being a "Successor Index"), then the Index Spot
Price for any date thereafter will be determined by the Calculation Agent
on behalf of the Company based on the closing level of the Successor Index
on such date. If the AMEX or any third party makes a material change in the
formula for, or the method of calculating, the Index or any Successor
Index, the Calculation Agent shall make such calculations as may be
required to determine the applicable Cash Settlement Value using the
formula and method of calculating the Index or any Successor Index as in
effect prior to such change or modification. If the AMEX and/or any third
party discontinues publication of the Index and/or any Successor Index, the
Calculation Agent will determine the applicable Cash Settlement Value based
on the formula and method used in calculating the Index or any Successor
Index as in effect on the date the Index or such Successor Index was last
published.
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S") and its affiliates may from time to time engage in
transactions involving the Underlying Stocks for their proprietary accounts
and for other accounts under their management, which may influence the
value of such Underlying Stocks and therefore the value of the Warrants.
MLPF&S and its affiliates will also be the writers of the hedge of the
Company's obligations under the Warrants and will be obligated to pay to
the Company upon exercise of Warrants an amount equal to the value of the
exercised Warrants. Accordingly, under certain circumstances, conflicts of
interest may arise between MLPF&S's responsibilities as Calculation Agent
with respect to the Warrants and its obligations under its hedge and its
status as a subsidiary of the Company. Under certain circumstances, the
duties of MLPF&S as Calculation Agent in determining the existence of
Extraordinary Events and Market Disruption Events could conflict with the
interests of MLPF&S as an affiliate of the issuer of the Warrants, Merrill
Lynch & Co., Inc., and with the interests of the holders of the Warrants.
9
<PAGE>
DESCRIPTION OF THE WARRANTS
GENERAL
An aggregate of 1,600,000 Warrants were issued. The Warrants were
issued under a Warrant Agreement (the "Warrant Agreement"), dated as of
December 27, 1993, between the Company and Citibank, N.A., as Warrant Agent
(the "Warrant Agent"). The following statements with respect to the
Warrants are summaries of the detailed provisions of the Warrant Agreement,
the form of which is filed as an exhibit to the Registration Statement
relating to the Warrants. Wherever particular provisions of the Warrant
Agreement or terms defined therein are referred to, such provisions or
definitions are incorporated by reference as a part of the statements made,
and the statements are qualified in their entirety by such reference.
A Warrant will not require, or entitle, a Holder to sell or purchase
any shares of any stock underlying the Index or any Successor Index or any
other securities from the Company. The Company will make only a U.S. dollar
cash settlement, if any, upon exercise of a Warrant.
The Warrants are immediately exercisable, as set forth under "Exercise
of Warrants". The Warrants will expire on December 15, 1995 (the
"Expiration Date") or may expire on an earlier date as described under
"Delisting of the Warrants". Warrants not exercised at or prior to 1:00
p.m., New York City time, on the second New York Business Day immediately
preceding the Expiration Date or earlier expiration will be deemed
automatically exercised on the first New York Business Day preceding the
Expiration Date or, in the case of early expiration, on the New York
Business Day prior to the Early Expiration Date. Warrants cancelled upon
the occurrence and continuation of an Extraordinary Event shall be
exercised as described below under "Extraordinary Events and Market
Disruption Events". The term "New York Business Day", as used herein, means
any day other than a Saturday or a Sunday or a day on which commercial
banks in The City of New York are required or authorized by law or
executive order to be closed, and "Index Business Day" means any day on
which the HKSE is open for trading.
The Warrants are unsecured contractual obligations of the Company and
rank on a parity with the Company's other unsecured contractual obligations
and with the Company's unsecured and unsubordinated debt. However, since
the Company is a holding company, the right of the Company, and hence the
right of creditors of the Company (including Holders of the Warrants), to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the
prior claims of creditors of the subsidiary, except to the extent that
claims of the Company itself as a creditor of the subsidiary may be
recognized. In addition, dividends, loans and advances from certain
subsidiaries, including Merrill Lynch, Pierce, Fenner & Smith Incorporated,
to the Company are restricted by net capital requirements under the
Securities Exchange Act of 1934, as amended, and under rules of certain
exchanges and other regulatory bodies.
CASH SETTLEMENT VALUE
The Cash Settlement Value of an exercised Warrant is an amount stated
in U.S. dollars that results from the following formula:
Percentage Change X $25
The "Percentage Change" will equal the following amount:
Index Spot Price - Index Strike Price
-------------------------------------
Index Strike Price
The "Index Strike Price" equals 528.64. The "Index Spot Price" relating to
any Exercise Date will be determined by MLPF&S (the "Calculation Agent")
and will equal the Closing Index Value on the Valuation Date relating to
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<PAGE>
such Exercise Date. The "Closing Index Value" for any Index Calculation Day
equals the closing value of the Index on such date. "Index Calculation
Day" means any day on which the Hong Kong Stock Exchange is open for
trading and the Index or any Successor Index is calculated and published.
The Cash Settlement Value will be rounded, if necessary, to the
nearest cent (with one-half cent being rounded upwards).
Set forth below is an illustration of the Cash Settlement Values of
Warrants at exercise based upon various hypothetical Percentage Change
values in the Index. The Percentage Change at Exercise indicates the
percentage increase or decrease in the value of the Index Spot Price as
compared to the Index Strike Price. The actual Cash Settlement Value of a
Warrant will depend entirely on the actual Percentage Change on the
applicable Valuation Date relating to the Exercise Date. The illustrative
Cash Settlement Values in the table do not reflect any "time value" for a
Warrant, which may be reflected in trading value, and are not necessarily
indicative of potential profit or loss, which are also affected by purchase
price and transaction costs.
<TABLE>
<CAPTION>
Index Percentage Cash
Change on Settlement
Valuation Date Value
---------------- -----------
<S> <C>
Less than or equal to 0%.......................... $ 0.00
10%............................................... 2.50
20%............................................... 5.00
30%............................................... 7.50
40%............................................... 10.00
50%............................................... 12.50
60%............................................... 15.00
70%............................................... 17.50
80%............................................... 20.00
90%............................................... 22.50
100%.............................................. 25.00
</TABLE>
A potential investor should review the historical performance of the
Index. The historical performance of the Index should not be taken as an
indication of future performance, and no assurance can be given that the
Index value will increase sufficiently to cause the Cash Settlement Value
with respect to the Warrants to be greater than zero.
BOOK-ENTRY PROCEDURES AND SETTLEMENT
The Warrants are represented by one registered global Warrant (the
"Global Warrant"). The Global Warrant has been deposited with, or on behalf
of, The Depository Trust Company, as Securities Depository (the "Securities
Depository" or "DTC"), and registered in the name of the Securities
Depository or a nominee thereof. Unless and until it is exchanged in whole
or in part for Warrants in definitive form in the limited circumstances
described below, the Global Warrant may not be transferred except as a
whole by the Securities Depository to a nominee of such Securities
Depository or by a nominee of such Securities Depository to such Securities
Depository or another nominee of such Securities Depository or by such
Securities Depository or any such nominee to a successor of such Securities
Depository or a nominee of such successor. Morgan Guaranty Trust Company of
New York, Brussels office, as operator for the Euroclear System
("Euroclear") and Cedel S.A. ("Cedel") will hold interests in the Global
Warrant on behalf of their participants through the facilities of DTC.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934,
11
<PAGE>
as amended. The Securities Depository was created to hold 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 Securities
Depository's participants include securities brokers and dealers (including
the Underwriter), banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or their representatives)
own the Securities Depository. Access to the Securities Depository book-
entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly. Persons who are not
participants may beneficially own securities held by the Securities
Depository only through participants.
Ownership of beneficial interests in the Warrants will be limited to
persons that have accounts with the Securities Depository ("Agent Members")
or persons that may hold interests through Agent Members. The Securities
Depository has advised the Company that upon the issuance of the Global
Warrant representing the Warrants, the Securities Depository will credit,
on its book-entry registration and transfer system, the Agent Members'
accounts with the respective principal amounts of the Warrants represented
by the Global Warrant. Ownership of beneficial interests in the Global
Warrant will be shown on, and the transfer of such ownership interests will
be effected only through, records maintained by the Securities Depository
(with respect to interests of Agent Members) and on the records of Agent
Members (with respect to interests of persons held through Agent Members).
The laws of some states may 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 own, transfer or pledge beneficial
interests in the Global Warrant.
So long as the Securities Depository, or its nominee, is the
registered owner of the Global Warrant, the Securities Depository or its
nominee, as the case may be, will be considered the sole owner or Holder of
the Warrants represented by the Global Warrant for all purposes under the
Warrant Agreement. Except as provided below, owners of beneficial
interests in the Global Warrant will not be entitled to have the Warrants
represented by the Global Warrant registered in their names, will not
receive or be entitled to receive physical delivery of the Warrants in
definitive form and will not be considered the owners or Holders thereof
under the Warrant Agreement. Accordingly, each person owning a beneficial
interest in the Global Warrant must rely on the procedures of the
Securities Depository and, if such person is not an Agent Member, on the
procedures of the Agent Member through which such person owns its interest,
to exercise any rights of a Holder under the Warrant Agreement. 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 the Global Warrant desires to give or take any action which a
Holder is entitled to give or take under the Warrant Agreement, the
Securities Depository would authorize the Agent Members holding the
relevant beneficial interests to give or take such action, and such Agent
Members would authorize beneficial owners owning through such Agent Members
to give or take such action or would otherwise act upon the instructions of
beneficial owners through them.
The Cash Settlement Value payable upon exercise of Warrants registered
in the name of the Securities Depository or its nominee will be paid by the
Warrant Agent to the Agent Members or, in the case of automatic exercise,
to the Securities Depository. None of the Company, the Warrant Agent or any
other agent of the Company or agent of the Warrant Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Warrant Agent, upon the receipt of
any payment of the Cash Settlement Value in respect of any portion of the
Global Warrant, will pay the relevant Agent Member in an amount
proportionate to its beneficial interest in the Global Warrant being
exercised and that such Agent Member will credit the accounts of the
beneficial owners of such Warrants. The Company expects that the Securities
Depository, in the case of automatic exercise, upon receipt of any payment
of the Cash Settlement Value in respect of all or any portion of the Global
Warrant, will credit the accounts of the Agent Members with payment in
amounts proportionate to their respective beneficial interests in the
portion of the Global Warrant so exercised, as shown on the records of the
Securities Depository. The Company also expects that payments by Agent
Members to owners of beneficial interests in the Global Warrant will be
governed by standing customer instructions and customary practices, as is
now the case with securities held for the accounts of customers in bearer
form or
12
<PAGE>
registered in "street name", and will be the responsibility of such Agent
Members. It is suggested that purchasers of Warrants with accounts at more
than one brokerage firm effect transactions in the Warrants, including
exercises, only through the brokerage firm or firms which hold that
purchaser's Warrants.
If the Securities Depository is at any time unwilling or unable to
continue as depository and a successor Securities Depository is not
appointed by the Company within 90 days or if the Company is subject to
certain events in bankruptcy, insolvency or reorganization, the Company
will issue Warrants in definitive form in exchange for the Global Warrant.
In addition, the Company may at any time determine not to have the Warrants
represented by the Global Warrant and, in such event, will issue Warrants
in definitive form in exchange for the Global Warrant. In any such
instance, an owner of a beneficial interest in the Global Warrant will be
entitled to have a number of Warrants equivalent to such beneficial
interest registered in its name and will be entitled to physical delivery
of such Warrants in definitive form.
Cedel and Euroclear. Warrantholders may hold their Warrants through
Cedel or Euroclear if they are participants of such systems, or indirectly
through organizations which are participants in such systems. Cedel and
Euroclear hold omnibus positions on behalf of their participants through
the facilities of DTC. All securities in Cedel or Euroclear are held on a
fungible basis without attribution of specific certificates to specific
securities clearance accounts.
Exercises of Warrants by persons holding through Cedel or Euroclear
participants will be effected through DTC, in accordance with DTC rules, on
behalf of the relevant European international clearing system by its
depositary; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to its depositary to take action to effect its
exercise of the Warrants on its behalf by delivering Warrants through DTC
and receiving payment in accordance with its normal procedures for next-day
funds settlement. Payments with respect to the Warrants held through Cedel
or Euroclear will be credited to the cash accounts of Cedel participants or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. See "Exercise and
Settlement of Warrants" herein.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
Cedel participants through electronic book-entry changes in accounts of
Cedel participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Cedel in any of 28 currencies,
including U.S. dollars. Cedel provides to its participants, among other
things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing.
Cedel interfaces with domestic markets in several countries. As a
professional depository, Cedel is subject to regulation by the Luxembourg
Monetary Institute. Cedel participants are recognized financial
institutions around the world, including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain
other organizations and include an affiliate of the Underwriter. Indirect
access to Cedel is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants in the Euroclear System and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers
of securities and cash. Transactions may now be settled in any of 27
currencies, including U.S. dollars. The Euroclear System includes various
other services, including securities lending and borrowing and interfaces
with domestic markets in several countries generally similar to the
arrangements of cross-market transfers with DTC described above. The
Euroclear System is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator") under
contract with Euroclear Clearance System S.C., a Belgium cooperative
corporation (the "Cooperative"). Morgan Guaranty Trust Company of New York
("Morgan") is a member bank of the United States Federal Reserve System.
All operations are conducted by the Euroclear
13
<PAGE>
Operator, and all Euroclear securities clearance accounts and Euroclear
cash accounts are accounts with the Euroclear Operator, not the
Cooperative. The Cooperative establishes policy for the Euroclear System on
behalf of Euroclear participants. Euroclear participants include banks
(including central banks), securities brokers and dealers and other
professional financial intermediaries and include an affiliate of the
Underwriter. Indirect access to the Euroclear System is also available to
other firms that clear through or maintain a custodial relationship with a
Euroclear participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System, and
applicable Belgian law (collectively, the "Terms and Conditions"). The
Terms and Conditions govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear
System, and receipt of payments with respect to securities in the Euroclear
System. All securities in the Euroclear System are held on a fungible basis
without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear participants, and has no record of
or relationship with persons holding through Euroclear participants.
All information herein on Cedel and Euroclear is derived from Cedel or
Euroclear, as the case may be, and reflects the policies of such
organizations; such policies are subject to change without notice.
EXERCISE AND SETTLEMENT OF WARRANTS
The Warrants are immediately exercisable, subject to postponement upon
the occurrence of an Extraordinary Event or a Market Disruption Event as
described under "Extraordinary Events and Market Disruption Events" herein,
and will expire on December 15, 1995 (the "Expiration Date"). Warrants not
exercised (including by reason of any such postponed exercise) at or before
1:00 P.M., New York City time, on the earlier of (i) the second New York
Business Day immediately preceding the Expiration Date and (ii) the Early
Expiration Date, will be automatically exercised as described under
"Automatic Exercise" below, subject to earlier cancellation as described
below under "Extraordinary Events and Market Disruption Events". See
"Minimum Exercise Amount" and "Maximum Exercise Amount" below.
A Warrantholder may exercise the Warrants on any New York Business Day
until 1:00 P.M., New York City time, on the earlier of (i) the second New
York Business Day immediately preceding the Expiration Date and (ii) the
Early Expiration Date, by causing (x) such Warrants to be transferred free
to the Warrant Agent on the records of DTC and (y) a duly completed and
executed Exercise Notice to be delivered by an Agent Member on behalf of
the Warrantholder to the Warrant Agent. Forms of Exercise Notice may be
obtained from the Warrant Agent at the Warrant Agent's Office. The Warrant
Agent's telephone number and facsimile transmission number for this purpose
are (201) 262-5444 and (201) 262-7521, respectively.
In the case of Warrants held through the facilities of Cedel or
Euroclear, a Warrantholder may exercise such Warrants on any New York
Business Day until 1:00 P.M., New York City time, on the earlier of (i) the
second New York Business Day immediately preceding the Expiration Date and
(ii) the Early Expiration Date by causing (x) such Warrants to be
transferred to the Warrant Agent, by giving appropriate instructions to the
participant holding such Warrants in either the Cedel or Euroclear system,
as the case may be, and (y) a duly completed and executed Exercise Notice
to be delivered on behalf of the Warrantholder by Cedel, in the case of
Warrants held through Cedel, or such participant, in the case of Warrants
held through Euroclear, to the Warrant Agent. Forms of Exercise Notice for
Warrants held through the facilities of either Cedel or Euroclear may be
obtained from the Warrant Agent at the Warrant Agent's Office or from Cedel
or Euroclear.
Except for Warrants subject to automatic exercise or held through the
facilities of Cedel or Euroclear, the "Exercise Date" for a Warrant will be
(i) the New York Business Day on which the Warrant Agent receives the
Warrant and Exercise Notice in proper form with respect to such Warrant, if
received at or prior to 1:00 P.M., New York City time, on such day, or (ii)
if the Warrant Agent receives such Warrant and Exercise Notice after
14
<PAGE>
1:00 P.M., New York City time, on a New York Business Day, then the first
New York Business Day following such New York Business Day.
In the case of Warrants held through the facilities of Cedel or
Euroclear, except for Warrants subject to automatic exercise, the "Exercise
Date" for a Warrant will be (i) the New York Business Day on which the
Warrant Agent receives the Exercise Notice in proper form with respect to
such Warrant if such Exercise Notice is received at or prior to 1:00 P.M.,
New York City time, on such day, provided that the Warrant is received by
the Warrant Agent by 1:00 P.M., New York City time, on the Valuation Date,
or (ii) if the Warrant Agent receives such Exercise Notice after 1:00 P.M.,
New York City time, on a New York Business Day, then the first New York
Business Day following such New York Business Day, provided that the
Warrant is received by 1:00 P.M., New York City time, on the Valuation Date
relating to exercises of Warrants on such succeeding New York Business Day.
In the event that the Warrant is received after 1:00 P.M., New York City
time, on the Valuation Date, then the Exercise Date for such Warrants will
be the first New York Business Day following the day on which such Warrants
are received or, if such day is not a New York Business Day, the next
succeeding New York Business Day. In the case of Warrants held through the
facilities of Cedel or Euroclear, in order to ensure proper exercise on a
given New York Business Day, participants in Cedel or Euroclear must submit
exercise instructions to Cedel or Euroclear, as the case may be, by 10:00
A.M., Luxembourg time, in the case of Cedel and by 10:00 A.M., Brussels
time (by telex), or 11:00 A.M., Brussels time (by EUCLID), in the case of
Euroclear. In addition, in the case of book-entry exercises by means of the
Euroclear System, (i) participants must also transmit, by facsimile
(facsimile number (201) 262-7521), to the Warrant Agent a copy of the
Exercise Notice submitted to Euroclear by 1:00 P.M., New York City time, on
the desired Exercise Date and (ii) Euroclear must confirm by telex to the
Warrant Agent by 9:00 A.M., New York City time, on the Valuation Date, that
the Warrants will be received by the Warrant Agent on such date; provided,
that if such telex communication is received after 9:00 A.M., New York City
time, on the Valuation Date, the Company will be entitled to direct the
Warrant Agent to reject the related Exercise Notice or waive the
requirement for timely delivery of such telex communication.
To ensure that an Exercise Notice and the related Warrants will be
delivered to the Warrant Agent before 1:00 P.M., New York City time, on a
given New York Business Day, a Warrantholder may need to give exercise
instructions to his broker or other intermediary substantially earlier than
1:00 P.M., New York City time, on such day. Different brokerage firms may
have different cut-off times for accepting and implementing exercise
instructions from their customers. Therefore, Warrantholders should consult
with their brokers and other intermediaries, if applicable, as to
applicable cut-off times and other exercise mechanics.
Except in the case of Warrants subject to automatic exercise and for
Warrants that upon exercise will entitle the holder thereof to receive an
Alternative Settlement Amount in lieu of the Cash Settlement Amount, if on
any Valuation Date the Cash Settlement Amount for any Warrants would be
zero, then the attempted exercise of any such Warrants will be void and of
no effect and, such Warrants will be transferred back to the Agent Member
that submitted them free on the records of DTC and, in any such case, such
Warrantholder will be permitted to re-exercise such Warrants prior to the
Expiration Date or the Early Expiration Date, as the case may be.
The "Valuation Date" for a Warrant will be the first Index Calculation
Day following the applicable Exercise Date, subject to postponement upon
the occurrence of an Extraordinary Event or a Market Disruption Event as
described below under "Extraordinary Events and Market Disruption Events"
or as a result of the exercise of a number of Warrants exceeding the limits
on exercise described below under "Maximum Exercise Amount". The AMEX will
calculate the Index once on each Index Calculation Day based upon the most
recent official closing prices of each of the Underlying Stocks as reported
by the HKSE. Due to time differences, trading on the HKSE occurs when the
AMEX is closed for business. The following is an illustration of the timing
of an Exercise Date and the ensuing Valuation Date, assuming (i) that all
relevant dates are New York Business Days and Index Calculation Days, (ii)
the absence of any intervening Extraordinary Event or Market Disruption
Event and (iii) the number of exercised Warrants does not exceed the
maximum permissible amount. If the Warrant Agent receives a Warrantholder's
Warrants and Exercise Notice in proper form at or prior to 1:00 P.M., New
York City time, on Wednesday, January 19, 1994, the Exercise Date for such
Warrants will be January 19 and the Valuation Date for such Warrants will
be Thursday, January 20, 1994 (except that in the case of Warrants held
through the facilities
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of Cedel or Euroclear, the Warrants must be received by 1:00 P.M., New York
City time, on the Valuation Date; if such Warrants are received after such
time, then the Exercise Date for such Warrants will be the day on which
such Warrants are received or, if such day is not a New York Business Day,
the next succeeding New York Business Day, and the Valuation Date for such
Warrants will be the first Index Calculation Day following such Exercise
Date). The Index Spot Price used to determine the Cash Settlement Value of
such Warrants will be the closing level of the Index on January 20, (i.e.,
the level of the Index calculated using values for the Underlying Stocks as
of the close of the HKSE on January 20 (assuming such day is an Index
Business Day), which, because of time differences, will occur at 2:30 A.M.,
New York City time, on January 20 (or 3:30 A.M., New York City time, during
the months in which Eastern Daylight Savings Time is in effect)).
Following receipt of Warrants and the related Exercise Notice in
proper form, the Warrant Agent will, not later than 5:00 P.M., New York
City time, on the applicable Valuation Date (or, if such Valuation Date is
not a New York Business Day, on the next succeeding New York Business Day
which is an Index Calculation Day) (i) obtain the Index Spot Price (which
will be the level of the Index on such Valuation Date), (ii) determine the
Cash Settlement Value of such Warrants and (iii) advise the Company of the
Aggregate Cash Settlement Value of the exercised Warrants. The Company will
be required to make available to the Warrant Agent, no later than 3:00
P.M., New York City time, on the fourth New York Business Day following the
Valuation Date (or, if the Valuation Date is not a New York Business Day,
on the fourth New York Business Day following the New York Business Day
next succeeding the Valuation Date), funds in an amount sufficient to pay
such aggregate Cash Settlement Value. If the Company has made such funds
available by such time, the Warrant Agent will thereafter be responsible
for making funds available to each appropriate Participant (including
Citibank, N.A. and Morgan as custodians for Cedel and Euroclear,
respectively, who, in turn, will disburse payments to Cedel and Euroclear,
as the case may be, who will be responsible for disbursing such payments to
each of their respective participants, who, in turn, will be responsible
for disbursing payments to the Warrantholders it represents), and such
Participant will be responsible for disbursing such payments to the
Warrantholders it represents and to each brokerage firm for which it acts
as agent. Each such brokerage firm will be responsible for disbursing funds
to the Warrantholders it represents.
"Calculation Agent" means MLPF&S or, in lieu thereof, another firm
selected by the Company to perform the functions of the Calculation Agent
in connection with the Warrants. MLPF&S, in its capacity as Calculation
Agent, will have no obligation to take the interests of the Company or the
Warrantholders into consideration in the event it determines, composes or
calculates the Cash Settlement Value. The Calculation Agent and its
affiliates may from time to time engage in transactions involving the
Underlying Stocks for their proprietary accounts and for other accounts
under their management, which may influence the value of such Underlying
Stocks. The Calculation Agent and its affiliates will also be the writers
of the hedge of the Company's obligations under the Warrants and will be
obligated to pay to the Company upon exercise of the Warrants an amount
equal to the value of the Warrants. Accordingly, under certain
circumstances, conflicts of interest may arise between the Calculation
Agent's responsibilities as Calculation Agent with respect to the Warrants
and its obligations under its hedge and its status as a subsidiary of the
Company. In addition, because the Calculation Agent is an affiliate of the
Company, certain conflicts of interest may arise in connection with the
Calculation Agent performing its role as Calculation Agent. The Calculation
Agent, as a registered broker-dealer, is required to maintain policies and
procedures regarding the handling and use of confidential proprietary
information, and such policies and procedures will be in effect throughout
the term of the Warrants to restrict the use of information relating to any
calculation of the Cash Settlement Value prior to its dissemination. The
Calculation Agent is also obligated to carry out its duties and functions
as Calculation Agent in good faith and using its reasonable judgment.
AUTOMATIC EXERCISE
All Warrants for which the Warrant Agent has not received a valid
Exercise Notice at or prior to 1:00 P.M., New York City time, on (i) the
second New York Business Day immediately preceding the Expiration Date or
(ii) the Early Expiration Date, as the case may be, or for which the
Warrant Agent has received a valid Exercise Notice but with respect to
which timely delivery of the relevant Warrants has not been made, together
with any
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Warrants the Valuation Date for which has at such time been postponed as
described under "Extraordinary Events and Market Disruption Events" below,
will be automatically exercised on the first New York Business Day
preceding the Expiration Date, or on the New York Business Day immediately
preceding the Early Expiration Date, as the case may be.
Except in the case of a postponed exercise following the occurrence of
an Extraordinary Event or a Market Disruption Event as described under
"Extraordinary Events and Market Disruption Events" below, the Company will
be required to make available to the Warrant Agent, no later than 3:00
P.M., New York City time, on the fourth New York Business Day after such
Valuation Date (or, if such Valuation Date is not a New York Business Day,
on the fourth New York Business Day following the New York Business Day
next succeeding such Valuation Date), funds in an amount sufficient to pay
such aggregate Cash Settlement Value. If the Company has made such funds
available by such time, the Warrant Agent will thereafter be responsible
for making funds available to DTC in an amount sufficient to pay the
aggregate Cash Settlement Value of the Warrants. DTC will be responsible
for disbursing such funds to each appropriate Agent Member (including
Citibank, N.A. and Morgan, who, in turn, will disburse payments to Cedel
and Euroclear, as the case may be, who will be responsible for disbursing
such payments to each of their respective participants, who, in turn, will
be responsible for disbursing payments to the Warrantholders it represents)
and such Agent Member will be responsible for disbursing such payments to
the Warrantholders it represents and to each brokerage firm for which it
acts as agent. Each such brokerage firm will be responsible for disbursing
funds to the Warrantholders it represents.
MINIMUM EXERCISE AMOUNT
No fewer than 100 Warrants may be exercised by a Warrantholder at any
one time, except in the case of automatic exercise or exercise upon
cancellation of the Warrants as described under "Extraordinary Events and
Market Disruption Events" below. Accordingly, except in the case of
automatic exercise of the Warrants or upon cancellation of the Warrants,
Warrantholders with fewer than 100 Warrants will need either to sell their
Warrants or to purchase additional Warrants, thereby incurring transaction
costs, in order to realize upon their investment. Warrants held through one
Agent Member (including participants in Cedel or Euroclear) may not be
combined with Warrants held through another Agent Member in order to
satisfy the minimum exercise requirement.
MAXIMUM EXERCISE AMOUNT
All exercises of Warrants (other than on automatic exercise) are
subject, at the Company's option, to the limitation that not more than 20%
of the Warrants originally issued (provided, however, that no more than 10%
of the Warrants originally issued shall be exercised for the account of any
Warrantholder) may be exercised on any Exercise Date and not more than 10%
of the Warrants originally issued may be exercised by or on behalf of any
Warrantholder, either individually or in concert with any other
Warrantholder, on any Exercise Date. If any New York Business Day would
otherwise, under the terms of the Warrant Agreement, be the Exercise Date
in respect to more than 20% of the Warrants originally issued, then at the
Company's election, 20% of the Warrants originally issued (provided,
however, that no more than 10% of the Warrants originally issued shall be
exercised for the account of any Warrantholder) shall be deemed exercised
on such Exercise Date (selected by the Warrant Agent on a pro rata basis,
but if, as a result of such pro rata selection, any registered holders of
Warrants would be deemed to have exercised less than 100 Warrants, then the
Warrant Agent shall first select an additional amount of such holders'
Warrants so that no holder shall be deemed to have exercised less than 100
Warrants), and the remainder of such warrants (the "Remaining Warrants")
shall be deemed exercised on the following New York Business Day (subject
to successive applications of this provision); provided that any Remaining
Warrants for which an Exercise Notice was delivered on a given Exercise
Date shall be deemed exercised before any other Warrants for which an
Exercise Notice was delivered on a later Exercise Date. As a result of any
postponed exercise as described above, Warrantholders will receive a Cash
Settlement Value determined as of a date later than the otherwise
applicable Valuation Date. In any such case, as a result of any such
postponement, the Cash Settlement
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Value actually received by Warrantholders may be lower than the otherwise
applicable Cash Settlement if the Valuation Date of the Warrants had not
been postponed.
THE INDEX
If the AMEX discontinues publication of the Index and the AMEX or
another entity publishes a successor or substitute index that the
Calculation Agent determines, in its sole discretion, to be comparable to
the Index (any such index being referred to hereinafter as a "Successor
Index"), then, upon the Calculation Agent's notification of such
determination to the Warrant Agent and the Company, the Calculation Agent
will substitute the Successor Index as calculated by AMEX or such other
entity for the Index and Calculate the Cash Settlement Value upon an
exercise as described above. Upon any selection by the Calculation Agent of
a Successor Index, the Company shall cause notice thereof to be published
in The Wall Street Journal (or another newspaper of general circulation)
within three New York Business Days of such selection.
If the AMEX discontinues publication of the Index and a Successor
Index is not selected by the Calculation Agent or is no longer published on
any Valuation Date, the value to be substituted for the Index for any
Valuation Date used to calculate the Cash Settlement Value upon exercise
will be a value computed by the Calculation Agent on each Valuation Date in
accordance with the procedures last used to calculate the Index prior to
such discontinuance.
If a Successor Index is selected or the Calculation Agent calculates a
value as a substitute for the Index, such Successor Index or value shall be
substituted for the Index for all purposes, including for purposes of
determining whether a Market Disruption Event or Extraordinary Event
exists.
If at any time the method of calculating the Index, or the value
thereof, is changed in a material respect, or if the Index is in any other
way modified so that such Index does not, in the opinion of the Calculation
Agent, fairly represent the value of the Index had such changes or
modifications not been made, then, from and after such time, the
Calculation Agent shall, at the close of business in New York, New York, on
each Valuation Date, make such adjustments as, in the good faith judgment
of the Calculation Agent, may be necessary in order to arrive at a
calculation of a value of a stock index comparable to the Index as if such
changes or modifications had not been made, and calculate such Closing
Index Value with reference to the Index, as adjusted. Accordingly, if the
method of calculating the Index is modified so that the value of such Index
is a fraction or a multiple of what it would have been if it had not been
modified (e.g., due to a split in the Index), the Calculation Agent shall
adjust the Index in order to arrive at a value of the Index as if it had
not been modified (e.g., as if such split had not occurred).
EXTRAORDINARY EVENTS AND MARKET DISRUPTION EVENTS
Extraordinary Events. The Warrant Agreement will provide that if the
Calculation Agent determines that an Extraordinary Event has occurred and
is continuing on the Index Business Day with respect to which the Index
Spot Price on a Valuation Date is to be determined (the "Applicable Index
Business Day"), then the Cash Settlement Value in respect of an exercise
shall be calculated on the basis that the Valuation Date shall be the next
Index Calculation Day following an Applicable Index Business Day on which
there is no Extraordinary Event or Market Disruption Event; provided that
if the Valuation Date has not occurred on or prior to the Expiration Date
or the Early Expiration Date, the Warrantholders will receive the
Alternative Settlement Amount in lieu of the Cash Settlement Value which
shall be calculated as if the Warrants had been cancelled on the Expiration
Date or the Early Expiration Date, as the case may be. The Company shall
promptly give notice to Warrantholders, by publication in a United States
newspaper with a national circulation (currently expected to be The Wall
Street Journal), if an Extraordinary Event shall have occurred.
"Extraordinary Event" means any of the following events:
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(i) a suspension or absence of trading on the HKSE of all the
Underlying Stocks which then comprise the Index or a Successor
Index;
(ii) the enactment, publication, decree or other promulgation
of any statute, regulation, rule or order of any court or any
other U.S. or non-U.S. governmental authority which would make it
unlawful for the Company to perform any of its obligations under
the Warrant Agreement or the Warrants; or
(iii) any outbreak or escalation of hostilities or other
national or international calamity or crises (including, without
limitation, natural calamities which in the opinion of the
Company may materially and adversely affect the economy of Hong
Kong or the trading of securities generally on the HKSE) which
has or will have a material adverse effect on the ability of the
Company to perform its obligations under the Warrants or to
modify the hedge of its position with respect to the Index.
For the purposes of determining whether an Extraordinary Event has
occurred: (1) a limitation on the hours or number of days of trading will
not constitute an Extraordinary Event if it results from an announced
change in the regular business hours of the HKSE and (2) an "absence of
trading" on the HKSE will not include any time when the HKSE itself is
closed for trading under ordinary circumstances.
To the Company's knowledge, no circumstances have arisen since the
inception of the Index that could have constituted an Extraordinary Event,
except that on July 22, 1992 and on September 17, 1993 trading on the HKSE
and The Hong Kong Futures Exchange Ltd. (the "HK Futures Exchange") was
suspended due to typhoons (severe storms) in Hong Kong (the "Typhoon
Suspensions"). Prior to the inception of the Index, and based on the
information published by the HKSE, trading on the HKSE was suspended during
the time of other world market breaks from October 20 through October 23,
1987. Trading in Hang Seng Index Futures on the HK Futures Exchange also
was suspended during the same four-day period (collectively, the "October
1987 Suspension"). The existence of such circumstances, however, is not
necessarily indicative of the likelihood of such circumstances arising or
not arising in the future. See "The Index-The Hong Kong Stock Exchange"
below.
If the Calculation Agent determines that an Extraordinary Event has
occurred and is continuing, and if the Extraordinary Event is expected by
the Calculation Agent to continue, the Company may immediately cancel all
outstanding Warrants by notifying the Warrant Agent of such cancellation
(the date such notice is given being the "Cancellation Date"), and each
Warrantholder's rights under the Warrants and the Warrant Agreement shall
thereupon cease; provided that each Warrant shall be exercised on the basis
that the Valuation Date for such Warrant shall be the Cancellation Date and
the holder of each such Warrant will receive, in lieu of the Cash
Settlement Value of such Warrant, an amount (the "Alternative Settlement
Amount"), determined by the Calculation Agent, which is the greater of (i)
the average of the last sale prices, as available, of the Warrants on the
AMEX (or any successor securities exchange on which the Warrants are
listed) on the 30 trading days preceding the date on which such
Extraordinary Event was declared; provided that, if the Warrants were not
traded on the AMEX (or such successor securities exchange) on at least 20
of such trading days, no effect will be given to this clause (i) for the
purpose of determining the Alternative Settlement Amount, and (ii) the
amount "X" calculated using the formula set forth below:
T A
X = I + [--- x ---]
2 B
where
I = The Cash Settlement Value of the Warrants determined as described
under "Cash Settlement Value" above, but subject to the following
modifications:
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(1) if the Cancellation Date for such Warrants is a date on which
the Index or a Successor Index is calculated and published, for the
purpose of determining such Cash Settlement Value, the Index Spot
Price will be determined as of such Cancellation Date except that, if
the Index Spot Price as of such day is less than 90% of the Index Spot
Price as of the immediately preceding Index Calculation Day, then the
Index Spot Price will be deemed to be 90% of the Index Spot Price on
such preceding Index Calculation Day; or
(2) if the Cancellation Date for such Warrants is a date on which
the Index or a Successor Index is not calculated or published, for the
purpose of determining such Cash Settlement Value, the Index Spot
Price will be deemed to be the lesser of (i) the Index Spot Price as
of the first Index Calculation Day immediately preceding the
Cancellation Date except that, if the Index Spot Price as of such day
is less than 90% of the Index Spot Price as of the second Index
Calculation Day immediately preceding such Cancellation Date, 90% of
the Index Spot Price as of such second Index Calculation Day and (ii)
the arithmetic average of four amounts, being (a) the Index Spot Price
at each of the three successive Index Calculation Days immediately
preceding the Cancellation Date and (b) the Index Spot Price at the
next Index Calculation Day, provided that if an Extraordinary Event
described in clause (i) of the definition of Extraordinary Event
continues for 30 consecutive days immediately following such
Cancellation Date, then the Calculation Agent shall calculate an
amount which, in its reasonable opinion, fairly reflects the value of
the Underlying Stocks on the Index Calculation Day immediately
following such Cancellation Date which, subject to approval by the
Company (such approval not to be unreasonably withheld), shall for
purposes of calculating the amount under this clause (2)(ii) be
treated as the figure arrived at under clause (2)(ii)(b);
T=U.S.$5.15, the initial offering price per Warrant;
A=the total number of days from but excluding the Cancellation Date
for such Warrants to and including the Expiration Date; and
B=the total number of days from but excluding the date the Warrants
were initially sold to and including the Expiration Date.
For the purposes of determining "I" in the above formula, in the event
that the Calculation Agent and the Company are required to have, but have
not, after good faith consultation with each other and within five days
following the first day upon which such Alternative Settlement Amount may
be calculated in accordance with the above formula, agreed upon a figure
under clause (2)(ii)(b) which fairly reflects the value of the Underlying
Stocks on the Cancellation Date, then the Calculation Agent shall promptly
nominate a third party, subject to approval by the Company (such approval
not to be unreasonably withheld), to determine such figure and calculate
the Alternative Settlement Amount in accordance with the above formula.
Such party shall act as an independent expert and not as an agent of the
Company or the Calculation Agent, and its calculation and determination of
the Alternative Settlement Amount shall, absent manifest error, be final
and binding on the Company, the Warrant Agent, the Calculation Agent and
the Warrantholders. Any such calculations will be made available to a
Warrantholder for inspection at the Warrant Agent's Office. Neither the
Company nor such third party shall have any responsibility for good faith
errors or omissions in calculating the Alternative Settlement Amount. Under
certain circumstances, the duties of MLPF&S as Calculation Agent in
determining the existence of Extraordinary Events could conflict with the
interests of MLPF&S as an affiliate of the issuer of the Warrants, Merrill
Lynch & Co., Inc.
Market Disruption Events. If the Calculation Agent determines that on
a Valuation Date a Market Disruption Event has occurred and is continuing,
the Valuation Date shall be postponed to the first succeeding Index
Business Day on which no Market Disruption Event occurs; provided that, if
the Valuation Date has not occurred on or prior to the fifth Index Business
Day following an Exercise Date because of Market Disruption Events, such
fifth Index Business Day shall be the Valuation Date regardless of whether
a Market Disruption Event has occurred on such day.
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"Market Disruption Event" means with respect to any Index Business Day
the occurrence or existence during the one-half hour period that ends at
the determination of the Closing Index Value for such Index Business Day
of:
(i) a suspension, material limitation or absence of trading on
the HKSE of (a) 20% or more of the Underlying Stocks and/or (b) the
stocks of any three of the four most highly capitalized companies
included in the Underlying Stocks which then comprise the Index or a
Successor Index; or
(ii) the suspension or material limitation on the HK Futures
Exchange or any other major futures or securities market (which as of
the date of this Prospectus includes only the HK Futures Exchange, but
which in the Calculation Agent's judgment may change in the future) of
trading in futures or options contracts related to the Hang Seng
Index, the Index or a Successor Index.
For the purposes of determining whether a Market Disruption Event has
occurred: (i) a limitation on the hours or number of days of trading will
not constitute a Market Disruption Event if it results from an announced
change in the regular business hours of the relevant exchange, (ii) a
decision to permanently discontinue trading in the relevant contract will
not constitute a Market Disruption Event, and (iii) a suspension in trading
in a futures or options contract on the Index by a major securities market
by reason of (a) a price change violating limits set by such securities
market, (b) an imbalance of orders relating to such contracts or (c) a
disparity in bid and ask quotes relating to such contracts will constitute
a suspension or material limitation of trading in futures or options
contracts related to the Index. Under certain circumstances, the duties of
MLPF&S as Calculation Agent in determining the existence of Market
Disruption Events could conflict with the interests of MLPF&S as an
affiliate of the issuer of the Warrants, Merrill Lynch & Co., Inc.
LISTING OF THE WARRANTS
The Warrants have been listed on the American Stock Exchange under the
Symbol "MHW.WS". The American Stock Exchange will expect to cease trading
the Warrants on such Exchange as of the close of business on the Expiration
Date.
DELISTING OF THE WARRANTS
In the event that the Warrants are delisted from, or permanently
suspended from trading on, the American Stock Exchange, and the Warrants
are not simultaneously accepted for trading pursuant to the rules of
another Self-Regulatory Organization, such Warrants not previously
exercised will expire on the date such delisting or trading suspension
becomes effective (the "Early Expiration Date") and such Warrants will be
deemed automatically exercised on the New York Business Day immediately
preceding the Early Expiration Date. The Cash Settlement Value, if any
(determined as provided under "Exercise of Warrants"), of such
automatically exercised Warrants will be paid on the fourth New York
Business Day following the Early Expiration Date. Settlement shall
otherwise occur as described under "Exercise and Settlement of Warrants".
The Company will notify Holders as soon as practicable of such delisting or
trading suspension. The Company has agreed in the Warrant Agreement that it
will not seek delisting of the Warrants or suspension of their trading on
the AMEX.
MODIFICATION
The Warrant Agreement and the terms of the Warrants may be amended by
the Company and the Warrant Agent, without the consent of the Holders of
any Warrants, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective or inconsistent provision
contained therein, or in any other manner which the Company may deem
necessary or desirable and which will not materially and adversely affect
the interests of the Holders of the Warrants.
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The Company and the Warrant Agent also may modify or amend the Warrant
Agreement and the terms of the Warrants, with the consent of the Holders of
not less than a majority in number of the then outstanding Warrants
affected, provided that no such modification or amendment that changes the
Warrant Strike Price so as to adversely affect the Holder, shortens the
period of time during which the Warrants may be exercised or otherwise
materially and adversely affects the exercise rights of the Holders of the
Warrants or reduces the percentage of the number of outstanding Warrants,
the consent of whose Holders is required for modification or amendment of a
Warrant Agreement or the terms of Warrants may be made without the consent
of the Holders of Warrants affected thereby.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other
corporation, and the Company may sell, lease or convey all or substantially
all of its assets to any corporation, provided that the corporation (if
other than the Company) formed by or resulting from any such consolidation
or merger or which shall have received such assets shall be a corporation
organized and existing under the laws of the United States of America or a
state thereof and shall assume payment of the Cash Settlement Value with
respect to all unexercised Warrants, according to their tenor, and the due
and punctual performance and observance of all of the covenants and
conditions of the Warrant Agreement and of the Global Warrant to be
performed by the Company.
THE INDEX
Unless otherwise stated, all information herein on the Index is
derived from the AMEX or other publicly available sources. Such information
reflects the policies of the AMEX as stated in such sources and such
policies are subject to change by the AMEX.
The Index is a new capitalization-weighted stock index designed,
developed, maintained and operated by, and is a service mark of, the AMEX
that measures the market value performance (share price times the number of
shares outstanding) of selected Hong Kong Stock Exchange listed stocks. The
Index as of December 17, 1993 was based on the capitalization of 30
Underlying Stocks trading on the Hong Kong Stock Exchange and is designed
to represent a substantial segment of the Hong Kong stock market. The Hong
Kong Stock Exchange as of December 17, 1993 was the primary trading market
for 25 of the 30 Underlying Stocks. The primary trading market for all of
the Underlying Stocks is either Hong Kong or London. Business sector
representation of the Underlying Stocks comprising the Index as of December
17, 1993 was as follows: Property development (26.78%), utilities (20.71%),
conglomerates (20.48%), and finance (19.35%) and also includes
hotel/leisure (4.70%), property investment (4.31%), airlines (2.10%), food
retailing (1.31%) and luxury retailing (0.26%). The Index was established
on June 25, 1993. (See the table below for a list of the Underlying Stocks
as of December 17, 1993.) As of December 17, 1993, the five largest
Underlying Stocks accounted for approximately 42.53% of the market
capitalization of the Index, with the largest being Hong Kong
Telecommunications, Ltd. (9.91%), followed by HSBC Holdings plc (9.68%),
Hang Seng Bank Ltd. (8.03%), Hutchison Whampoa Ltd. (7.81%) and Sun Hung
Kai Properties Ltd. (7.10%). The lowest weighted Underlying Stock, as of
December 17, 1993, was Dickson Concepts International Ltd. (0.26%).
The Index will be maintained by the AMEX and will contain at least 30
Underlying Stocks at all times. In addition, the Underlying Stocks must
meet certain listing and maintenance standards as discussed below. The AMEX
may change the composition of the Index at any time in order to more
accurately reflect the composition and track the movement of the Hong Kong
stock market. Any replacement Underlying Stock must also meet the
Underlying Stock listing and maintenance standards as discussed below.
Further, the AMEX may replace Underlying Stocks in the event of certain
corporate events, such as takeovers, or mergers, that change the nature of
the security.
22
<PAGE>
The AMEX will select Underlying Stocks on the basis of their market
weight, trading liquidity, and representation of the business industries
reflected on the Hong Kong Stock Exchange. The AMEX will require that each
Underlying Stock be one issued by an entity with major business interests
in Hong Kong, listed for trading on the Hong Kong Stock Exchange, and have
its primary trading market located in a country with which the AMEX has an
effective surveillance sharing agreement. The AMEX will remove any
Underlying Stock failing to meet the above listing and maintenance criteria
within 20 days after such failure occurs. In order to ensure that the Index
does not contain a large number of thinly-capitalized, low-priced
securities with small public floats and low trading volumes, the AMEX has
also established additional qualification criteria for the inclusion and
maintenance of Underlying Stocks, based on the following standards: (1) all
Underlying Stocks selected for inclusion in the Index must have and
thereafter maintain, an average daily capitalization, as calculated by the
total number of shares outstanding times the latest price per share (in
Hong Kong dollars), measured over the prior 6-month period, of at least
H.K.$3,000,000,000 (approximately U.S.$388,000,000 on the date hereof); (2)
all Underlying Stocks selected for inclusion in the Index must have, and
thereafter maintain, an average daily closing price, measured over the
prior 6-month period, not lower than H.K.$2.50 (approximately U.S.$0.32 on
the date hereof); (3) all Underlying Stocks selected for inclusion in the
Index must have, and thereafter maintain an average daily trading volume,
measured over the prior 6-month period, of more than 1,000,000 shares per
day, although up to, but no more than, three Underlying Stocks may have an
average daily trading volume, measured over the prior month period, of less
than 1,000,000 shares per day, but in no event less than 500,000 shares per
day; and (4) all Underlying Stocks selected for inclusion in the Index must
have, and thereafter maintain, a minimum "free float" value (total freely
tradeable outstanding shares minus insider holdings), based on a monthly
average measured over the prior 3-month period, of U.S.$238,000,000,
although up to, but no more than, three Underlying Stocks may have a free
float value of less than U.S.$238,000,000 but in no event less than
U.S.$150,000,000, measured over the same period. The AMEX will review and
apply the above qualification criteria relating to the Underlying Stocks on
a quarterly basis, conducted the last business day in January, April, July,
and October. Any Underlying Stock failing to meet the above listing and
maintenance criteria will be reviewed on the second Friday of the second
month following the quarterly review to again determine compliance with the
above criteria. Any Underlying Stock failing this second review will be
replaced by a "qualified" Underlying Stock effective upon the close of
business on the following Friday provided however, that if such Friday is
not a New York Business Day, the replacement will be effective at the close
of business on the first preceding New York Business Day. For example, if
an Underlying Stock was found to be below the maintenance criteria on
Monday, January 31, 1994, it would be reviewed again on March 11 and, if
ineligible, would be replaced by a qualified security at the close of
business on March 18, 1994. If March 18 happened not to be a New York
Business Day, the replacement would be effective at the close of business
on the preceding Thursday, March 17, 1994, assuming that Thursday was a New
York Business Day. The AMEX will notify its membership immediately after it
determines to replace an Underlying Stock.
The annual reports and prospectuses of the companies listed on the
Hong Kong Stock Exchange are available for investors' inspection in the
City Hall Library (a public library in Hong Kong Central). The Hong Kong
Stock Exchange library also has information for each listed company but it
is available only to members of the Hong Kong Stock Exchange.
A company whose stock is included in the Index is not required to be
incorporated under the laws of Hong Kong. As of December 17, 1993, eight
of the thirty companies whose stocks comprise the Underlying Stocks were
not incorporated in Hong Kong. They were (country of incorporation shown
within parentheses): Dairy Farm International Holdings Ltd. (Bermuda),
Dickson Concepts (International) Ltd. (Bermuda), Great Eagle Holdings Ltd.
(Bermuda), Hong Kong Land Holdings Ltd. (Bermuda), HSBC Holdings plc
(England), Jardine Matheson Holdings Ltd. (Bermuda), Jardine Strategic
Holdings Ltd. (Bermuda) and Tai Cheung Holdings Ltd. (Bermuda).
The Index is a capitalization-weighted index. A company's market
capitalization is calculated by multiplying the number of shares
outstanding by the company's current share price (in Hong Kong dollars).
For valuation purposes unrelated to the Warrants, one Index unit (1.0) is
assigned a fixed value of one U.S. dollar. The Index measures the average
changes in price of the Underlying Stocks weighted according to their
respective market capitalizations, so that the effect of a percentage price
change in an Underlying Stock will be greater the larger the Underlying
Stock's market capitalization. The Index was established by the AMEX on
June 25, 1993, on which date
23
<PAGE>
the Index value was set at 350.00. The daily calculation and public
dissemination by the AMEX of the Index value commenced on September 1,
1993. The data relating to the Index was back-calculated by the AMEX from
January 2, 1989 to August 31, 1993. The Index is calculated by (i) adding
the market capitalization of each Underlying Stock and (ii) dividing such
sum by an adjusted base market capitalization or divisor. On June 25, 1993,
the market value of the Underlying Stocks was approximately
H.K.$1,152,829,149,500 (equivalent to approximately U.S.$148,656,241,000)
and the divisor used to calculate the Index was 3,293,797,570. The AMEX
selected that particular divisor number in order, among other things, to
ensure that the Index was set at a general price level consistent with
other well recognized stock markets. The divisor is subject to periodic
adjustments as set forth below. The Index is calculated once every Index
Calculation Day by the AMEX based on the most recent official closing
prices of each of the Underlying Stocks reported by the Hong Kong Stock
Exchange. Pricing of the Index will be performed each day and be
disseminated before the opening of trading via the Consolidated Tape
Authority Network-B continuously during each New York Business Day. The
dissemination value, however, will remain the same throughout the trading
day because the trading hours of the Hong Kong Stock Exchange do not
overlap with AMEX trading hours. Accordingly, updated price information
will be unavailable.
In order to maintain continuity in the level of the Index in the event
of certain changes due to non-market factors affecting the Underlying
Stocks, such as the addition or deletion of stocks, substitution of stock,
stock dividends, stock splits, distributions of assets to stockholders or
other capitalization events, the divisor used in calculating the Index is
adjusted in a manner designed to prevent any instantaneous change or
discontinuity in the level of the Index and in order that the value of the
Index immediately after such change will equal the level of the Index
immediately prior to the change. Thereafter, the divisor remains at the new
value until a further adjustment is necessary as the result of another
change. Nevertheless changes in the identities and characteristics of the
Underlying Stocks may significantly affect the behavior of the Index over
time.
The AMEX is under no obligation to continue the calculation and
dissemination of the Index and the method by which the Index is calculated
and the name "The AMEX Hong Kong 30 Index" may be changed at the discretion
of the AMEX. The Warrants are not sponsored, endorsed, sold or promoted by
the AMEX. No inference should be drawn from the information contained in
this Prospectus that the AMEX makes any representation or warranty, implied
or express, to the Company, the Warrantholders or any member of the public
regarding the advisability of investing in securities generally or in the
Warrants in particular or the ability of the Index to track general stock
market performance. The AMEX has no obligation to take the needs of the
Company or the Warrantholders into consideration in determining, composing
or calculating the Index. The AMEX is not responsible for, and has not
participated in the determination of the timing of prices for or quantities
of, the Warrants to be issued or in the determination or calculation of the
equation by which the Warrants are to be settled in cash. The AMEX has no
obligation or liability in connection with the administration, marketing or
trading of the Warrants.
The use of and reference to the Index in connection with the Warrants
have been consented to by the AMEX.
Except with respect to the responsibility of the Calculation Agent to
make certain calculations under certain circumstances as described herein
none of the Company, the Warrant Agent, the Calculation Agent or the
Underwriter accepts any responsibility for the calculation, maintenance or
publication of the Index or any Successor Index. The AMEX disclaims all
responsibility for any inaccuracies in the data on which the Index is
based, or any mistakes or errors or omissions in the calculations or
dissemination of the Index or for the manner in which such index is applied
in determining any Cash Settlement Value or Alternative Settlement Amount
upon exercise of the Warrants.
The following table presents pertinent market information for each of
the component stocks in the Index as of December 17, 1993. As of such date
the total capitalization of the component stocks of the Index was
approximately U.S.$227.373 billion. Market capitalizations of the
individual stocks in the Index ranged from approximately U.S.$0.59 billion
to a high of U.S.$22.522 billion, with the median being U.S.$5.301 billion.
24
<PAGE>
<TABLE>
<CAPTION>
COMPANY NAME INDUSTRY INDEX WEIGHT
- ------------------------------------- -------------------- -------------
<S> <C> <C>
HONG KONG TELECOMMUNICATIONS LTD..... Utilities 9.91%
HSBC HOLDING PLC..................... Finance 9.68%
HANG SENG BANK LTD................... Finance 8.03%
HUTCHISON WHAMPOA LTD................ Conglomerates 7.81%
SUN HUNG KAI PROPERTIES LTD.......... Property Development 7.10%
CHINA LIGHT AND POWER CO. LTD........ Utilities 5.84%
CHEUNG KONG HOLDINGS LTD............. Property Development 5.32%
WHARF HOLDINGS LTD................... Hotel/Leisure 4.03%
HENDERSON LAND DEVELOPMENT CO. LTD... Property Development 3.70%
HONG KONG LAND HOLDINGS LTD.......... Property Investment 3.67%
SWIRE PACIFIC LTD. 'A'............... Conglomerates 3.43%
HONG KONG ELECTRIC HOLDINGS LTD...... Utilities 3.12%
NEW WORLD DEVELOPMENT CO. LTD........ Property Development 3.07%
JARDINE MATHESON HOLDINGS LTD........ Conglomerates 2.88%
WHEELOCK AND COMPANY LTD............. Conglomerates 2.36%
CITIC PACIFIC LTD.................... Conglomerates 2.31%
HOPEWELL HOLDINGS LTD................ Property Development 2.12%
CATHAY PACIFIC AIRWAYS LTD........... Airlines 2.10%
HONG KONG AND CHINA GAS CO. LTD...... Utilities 1.86%
JARDINE STRATEGIC HOLDINGS LTD....... Conglomerates 1.69%
BANK OF EAST ASIA LTD................ Finance 1.64%
HYSAN DEVELOPMENT CO. LTD............ Property Development 1.49%
AMOY PROPERTIES...................... Property Development 1.44%
DAIRY FARM INTL. HOLDINGS LTD........ Food Retailing 1.31%
HANG LUNG DEVELOPMENT CO. LTD........ Property Development 1.17%
HENDERSON INVESTMENT LTD............. Property Development 0.93%
HONG KONG AND SHANGHAI HOTELS LTD.... Hotel/Leisure 0.66%
GREAT EAGLE HOLDINGS LTD............. Property Investment 0.64%
TAI CHEUNG HOLDINGS LTD.............. Property Development 0.42%
DICKSON CONCEPTS INTERNATIONAL LTD... Luxury Retailing 0.26%
- --------------------
</TABLE>
* The sum of Index Weight percentages may be less than 100% due to
rounding.
THE HONG KONG STOCK EXCHANGE
As of September 30, 1993, the Hong Kong Stock Exchange was the world's
seventh largest stock exchange based on U.S. dollar market capitalization.
The Hong Kong Stock Exchange market is a continuous market where trading is
order-based through a computer-assisted system. Transactions are generally
conducted by telephone. However, broker-dealers continue to operate from
the stock exchange floor, and trading is therefore occasionally face-to-
face. There are no market-makers in Hong Kong, but exchange dealers may act
as dual capacity broker-dealers. All of the Underlying Stocks of the Index
are traded through the computerized trading system. Trading is undertaken
from 10:00 A.M. to 12:30 P.M. and then from 2:30 P.M. to 3:30 P.M. (Hong
Kong time) every Hong Kong day except Saturdays, Sundays and other days on
which the Hong Kong Stock Exchange is closed. Hong Kong time is 12 hours
ahead of Eastern Daylight Savings Time and 13 hours ahead of Eastern
Standard Time. Settlement of trades is required within 48 hours and
requires either delivery of share certificates or book-entry delivery
through the Central Clearing and Settlement System.
Due to the time differences between New York City and Hong Kong, on
any normal trading day, trading on the Hong Kong Stock Exchange of the
Underlying Stocks currently will cease at 2:30 A.M. or 3:30 A.M., New
25
<PAGE>
York City time. Using the last reported closing prices of the Underlying
Stocks on the Hong Kong Stock Exchange, the closing level of the Index on
any such trading day generally will be calculated, published and
disseminated by the AMEX in the United States shortly prior to the opening
of trading on the AMEX in New York on the same calendar day.
The Hong Kong Stock Exchange has adopted certain measures intended to
prevent any extreme short-term price fluctuations resulting from order
imbalances or market volatility. Where the Hong Kong Stock Exchange
considers it necessary for the protection of the investor or the
maintenance of an orderly market, it may at any time suspend dealings in
any securities or cancel the listing of any securities in such
circumstances and subject to such conditions as it thinks fit, whether
requested by the listed issuer or not. The Hong Kong Stock Exchange may
also do so when: (1) an issuer fails, in a manner which the Hong Kong Stock
Exchange considers material, to comply with the Hong Kong Stock Exchange
Listing Rules or its Listing Agreements or (2) the Hong Kong Stock Exchange
considers there are insufficient securities in the hands of the public; or
(3) the Hong Kong Stock Exchange considers that the listed issuer does not
have a sufficient level of operations or sufficient assets to warrant the
continued listing of the issuer's securities; or (4) the Hong Kong Stock
Exchange considers that the issuer or its business is no longer suitable
for listing. Investors should also be aware that the Hong Kong Stock
Exchange may suspend the trading of individual stocks in certain limited
and extraordinary circumstances, until certain price-sensitive information
has been disclosed to the Public. For instance, dealing on a listed
company's shares will normally be suspended when information about an
intention to make a private placing, or a very substantial transaction
compared to the net asset value of the company, has been leaked through an
improper channel. Trading will not be resumed until after a formal
announcement has been made. Trading of a company's shares may also be
suspended if there is unusual trading activity in that stock.
An issuer may apply for suspension on its own accord. A suspension
request will normally only be acceded to in the following circumstances:
(1) where, for a reason acceptable to the Hong Kong Stock Exchange, price-
sensitive information cannot at that time be disclosed (2) where the Issuer
is subject to an offer, but only where terms have been agreed in principle
and require discussion with, and agreement by one or more major
shareholders (suspensions will only normally be appropriate where no
previous announcement has been made); (3) to maintain an orderly market;
(4) where there is an occurrence of certain levels of notifiable
transactions, such as substantial changes in the nature, control or
structure of the issuer, where publication of full details is necessary to
permit a realistic valuation to be made of the securities concerned, or the
approval of shareholders is required; (5) where the issuer is no longer
suitable for listing, or becomes a "cash" company; or (6) for issuers going
into receivership or liquidation.
As a result of the foregoing, variations in the Index may be limited
by suspension of trading of individual stocks which comprise the Index
which may in turn, adversely affect the value of the Warrants. In addition,
a partial or total halt in trading of all of the Underlying Stocks could
result in an Extraordinary Event or a Market Disruption Event, if such
Events were declared by the Company. As a result, the Valuation Date of
exercised Warrants would be postponed and the Cash Settlement Value (or
Alternative Settlement Amount) actually received by Warrantholders may be
substantially lower (including zero) than the otherwise applicable Cash
Settlement Value if the valuation of the Warrants had not been postponed.
See "Description of the Warrants-Extraordinary Events and Market Disruption
Events" herein.
In 1977, the Hong Kong government authorized trading in commodities.
The HK Futures Exchange currently provides for trading in gold, sugar and
soybeans in addition to Hang Seng Index and Hong Kong Interbank Offered
Rate contracts.
The stock index contracts traded on the HK Futures Exchange are based
upon the Hang Seng Index ("HSI") and its four sub-indices: properties,
utilities, finance, and commerce and industry. The HSI is a value-weighted
index of 33 stocks and every stock in the HSI is represented in one of the
four sub-indices. The following Underlying Stocks of the Index (as of
December 16, 1993) are not constituent securities of the HSI: Amoy
Properties Ltd., Dickson Concepts (International) Ltd., Henderson
Investment Ltd. and Tai Cheung (Holdings) Ltd. The following constituent
securities of the HSI (as of December 16, 1993) are not Underlying Stocks
of the Index:
26
<PAGE>
Hong Kong Aircraft Eng. Co. Ltd., Zai Sun Garment International Ltd.,
Mandarin Oriental International Ltd., Mirmar Hotel and Inv. Co. Ltd., Shun
Tak Holdings Ltd., Television Broadcasts Ltd. and Winsor Industrial
Corporation Ltd. The Index also differs from the HSI in that, among other
things, the selection, maintenance and replacement criteria for the
constituent securities of the two indices are not the same and that they
are operated and governed by the rules of different entities.
Currently, the contracts listed on the HK Futures Exchange are HSI
futures, HSI sub-indices futures, HSI options, gold and Hong Kong Interbank
Offered Rate futures. There is a daily maximum fluctuation limit of 300
points imposed on the HSI contracts (not applicable to spot mark
contracts). Once the limit is touched, orders cannot be transacted above
(the outside limit) or below (the downside limit) but orders within the
range can continue to trade.
The foregoing discussion reflects the current rules governing the Hong
Kong Stock Exchange and the HK Futures Exchange, which are subject to
change.
A potential investor should review the historical performance of the
Index. The historical performance of the Index should not be taken as an
indication of future performance, and no assurance can be given that the
Index will increase sufficiently to cause the Cash Settlement Value with
respect to the Warrants to be greater than zero.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
27
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
CONSTANT MATURITY U.S. TREASURY YIELD INCREASE WARRANTS, EXPIRING
JANUARY 25, 1996
On November 3, 1994, Merrill Lynch & Co., Inc. (the "Company") issued
2,200,000 Constant Maturity U.S. Treasury Yield Increase Warrants, Expiring
January 25, 1996 (the "Warrants"). Each Warrant will entitle the Holder thereof
to receive from the Company a payment, if any, (the "Cash Settlement Value") on
January 25, 1996 (the "Expiration Date"), or on such earlier date as described
herein, based upon the increase in the CMT Yield. The CMT Yield is the yield to
maturity on U.S. Treasury securities with a constant maturity of two years as
more fully described herein. The Cash Settlement Value will equal the greater of
(i) U.S. $100 x 4 x (Spot Yield - Strike Yield) and (ii) zero. The "Strike
Yield" equals 6.78%. The "Spot Yield" will equal the CMT Yield on the Exercise
Date, as determined by the Calculation Agent. The Warrants will be automatically
exercised on the earlier of the fifth New York Business Day immediately
preceding January 25, 1996 or the New York Business Day immediately preceding
the date of occurrence of certain events in bankruptcy, insolvency or
reorganization involving the Company or the date of their earlier expiration
upon delisting from, or permanent suspension from trading on, the American Stock
Exchange (the "AMEX") unless the Warrants are simultaneously accepted for
trading pursuant to the rules of another Self-Regulatory Organization (as
defined herein). The Warrants are not exercisable at the option of the Holder.
See "Description of the Warrants".
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF
EXPIRING WORTHLESS UNLESS THE CMT YIELD INCREASES. INVESTORS THEREFORE SHOULD BE
PREPARED TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS, AND
ARE ADVISED TO CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS RELATING
TO THE WARRANTS", "DESCRIPTION OF THE WARRANTS", "DESCRIPTION OF THE WARRANTS--
AUTOMATIC EXERCISE PRIOR TO THE EXPIRATION DATE".
The Warrants have been listed on the American Stock Exchange under the
symbol "YIX.WS".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus may be used by the Underwriter in connection with offers
and sales related to market-making transactions in the Warrants. The Underwriter
may act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale. The
distribution of the Warrants will conform to the requirements set forth in the
applicable sections of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc.
-----------------------------
MERRILL LYNCH & CO.
-----------------------------
The date of this Prospectus is , 1995.
<PAGE>
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT
APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Warrants shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
CERTAIN IMPORTANT INFORMATION CONCERNING THE WARRANTS
A Holder will receive a cash payment on the Expiration Date only if the
Warrants have a Cash Settlement Value in excess of zero on the Exercise
Date. The Spot Yield determined on the Exercise Date will establish whether
the Warrants have a positive Cash Settlement Value on the Expiration Date.
The Warrants will be "in-the-money" (i.e., their Cash Settlement Value will
exceed zero) on the Exercise Date only if the Spot Yield is greater than
6.78%. If the Spot Yield is equal to or less than 6.78% on the Exercise
Date, the Warrant will expire worthless and the Holder will have sustained
a total loss of the purchase price of such Warrant. Investors therefore
should be prepared to sustain a total loss of the purchase price of their
Warrants.
3
<PAGE>
RISK FACTORS RELATING TO THE WARRANTS
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF
EXPIRING WORTHLESS. INVESTORS THEREFORE SHOULD BE PREPARED TO SUSTAIN A
TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS. IT IS SUGGESTED THAT
INVESTORS CONSIDERING PURCHASING THE WARRANTS BE EXPERIENCED WITH RESPECT
TO OPTIONS ON SECURITIES AND OPTION TRANSACTIONS AND REACH AN INVESTMENT
DECISION ONLY AFTER CAREFULLY CONSIDERING ALL THE RISK FACTORS SET FORTH IN
THIS SECTION OF THIS PROSPECTUS, THE SUITABILITY OF THE WARRANTS IN LIGHT
OF THEIR PARTICULAR CIRCUMSTANCES AND ALL THE OTHER INFORMATION SET FORTH
IN THIS PROSPECTUS.
Exercise of the Warrants. The Warrants will be automatically exercised
on the Exercise Date and are not exercisable at the option of the Holder.
Automatic Exercise of the Warrants upon Delisting. In the event that
the Warrants are delisted from, or permanently suspended from trading on,
the American Stock Exchange and the Warrants are not simultaneously
accepted for trading pursuant to the rules of another self-regulatory
organization (a "Self-Regulatory Organization") that are filed with the
Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, the Warrants will expire on the date such delisting or
trading suspension becomes effective and will be automatically exercised on
the New York Business Day immediately preceding the date of such early
expiration. At the time of such automatic exercise, the Warrants may be
out-of-the-money such that the Cash Settlement Value will equal zero.
Certain Factors Affecting the Value of the Warrants. The Cash
Settlement Value of the Warrants at any time prior to expiration is
typically expected to be less than the Warrants' trading value at that
time. The difference between the trading value and the Cash Settlement
Value will reflect a number of factors, including a "time value" for the
Warrants. The "time value" of the Warrants will depend upon the length of
the period remaining to expiration, among other factors. The expiration
date of the Warrants will be accelerated should the Warrants be delisted or
should their trading on the American Stock Exchange be suspended
permanently unless the Warrants simultaneously are accepted for trading
pursuant to the rules of another Self-Regulatory Organization. Any such
acceleration would result in the total loss of any otherwise remaining
"time value" and could occur when the Warrants are out-of-the-money, thus
resulting in total loss of the purchase price of the Warrants. See
"Description of the Warrants--Automatic Exercise Prior to the Expiration
Date". Before selling Warrants, owners of Warrants should carefully
consider the trading value of the Warrants, the value of the CMT Yield and
probable range of Cash Settlement Values and any related transaction costs.
There can be no assurance as to how the Warrants will trade in the
secondary market or whether such market will be liquid. The trading value
of a Warrant is expected to be dependent upon a number of complex
interrelated factors, including those listed below. The expected
theoretical effect on the trading value of a Warrant of each of the factors
listed below, assuming in each case that all other factors are held
constant, is as follows:
(1) The CMT Yield. If the CMT Yield increases relative to the Strike
Yield, the trading value of a Warrant is expected to increase. If the CMT
Yield decreases relative to the Strike Yield, the trading value of a
Warrant is expected to decrease.
(2) The volatility of the CMT Yield. If the volatility of the CMT
Yield increases, the trading value of a Warrant is expected to increase.
If such volatility decreases, the trading value of a Warrant is expected
to decrease.
(3) The general level of interest rates in the United States. If the
general level of interest rates in the United States increases, the
trading value of a Warrant is expected to increase. If the general level
of interest rates in the United States decreases, the trading value of a
Warrant is expected to decrease.
(4) The time remaining to the expiration date of the Warrants. As
the time remaining to the expiration date of the Warrants decreases, the
trading value of a Warrant is expected to decrease.
4
<PAGE>
As noted above, these hypothetical scenarios are based on the assumption
that all other factors are held constant. In reality, it is unlikely that
only one factor would change in isolation, since changes in one factor
usually cause, or result from, changes in others. Some of the factors
referred to above are, in turn, influenced by the political and economic
factors discussed below.
Warrants Not Standardized Options Issued by the Options Clearing
Corporation. Each Warrant constitutes an option having a value based upon
one or more United States Treasury securities, as calculated in the CMT
Yield. However, the Warrants are not standardized options of the type
issued by the Options Clearing Corporation (the "OCC"), a clearing agency
regulated by the Securities and Exchange Commission. For example, unlike
purchasers of OCC standardized options who have the credit benefits of
guarantees and margin and collateral deposits by OCC clearing members to
protect the OCC from a clearing member's failure, purchasers of Warrants
must look solely to the Company for performance of its obligations to pay
the Cash Settlement Value on the exercise of Warrants. Further, the market
for the Warrants is not expected to be generally as liquid as the market
for some OCC standardized options.
The Warrants are unsecured contractual obligations of the Company and
will rank on a parity with the Company's other unsecured contractual
obligations and with the Company's unsecured and unsubordinated debt.
However, since the Company is a holding company, the right of the Company,
and hence the right of creditors of the Company (including Holders of the
Warrants), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to the Company are restricted by net capital requirements
under the Securities Exchange Act of 1934, as amended, and under rules of
certain exchanges and other regulatory bodies.
General Risk Considerations. Options and warrants provide opportunities
for investment and pose risks to investors as a result of fluctuations in
the value of the underlying investment. In general, certain of the risks
associated with the Warrants are similar to those generally applicable to
other options or warrants of private corporate issuers.
The purchaser of a Warrant may lose his entire investment. This risk
reflects the nature of a Warrant as an asset which tends to decline in
value over time and which may, depending on the CMT Yield as compared to
the Strike Yield, become worthless when it expires. Assuming all other
factors are held constant, the more a Warrant is out-of-the-money and the
shorter its remaining term to expiration, the greater the risk that a
purchaser of the Warrant will lose all of his investment. This means that
the purchaser of a Warrant who does not sell it in the secondary market
will necessarily lose his entire investment in the Warrant if it expires
when the Spot Yield is less than or equal to the Strike Yield.
If the CMT Yield does not increase relative to the Strike Yield to an
extent sufficient to cover an investor's cost of the Warrant (i.e., the
purchase price plus transaction costs, if any) before the Warrant expires,
the investor will lose all or a part of his investment in the Warrant upon
expiration.
The CMT Yield is derived from United States Treasury securities. The
value of any debt security, including Treasury securities, may be affected
by complex political and economic factors, including the rate of inflation,
growth of gross national product and balance of payments for the United
States.
Prospective investors in the Warrants should be aware that the proper
characterization of the Warrants for United States Federal income tax
purposes is uncertain and that the ultimate United States Federal income
tax treatment of the Warrants could differ significantly depending upon how
the Warrants are characterized for United States Federal income tax
purposes. Accordingly, prospective investors in the Warrants are urged to
consult their own tax advisors as to the proper characterization of the
Warrants for United States Federal income tax purposes.
5
<PAGE>
The AMEX requires that Warrants be sold only to investors with options
approved accounts and requires that its members and member organizations
and registered employees thereof make certain suitability determinations
before recommending transactions in Warrants. It is suggested that
investors considering purchasing the Warrants be experienced with respect
to options on securities and option transactions and understand the risks
of transactions such as the Warrants and reach an investment decision only
after carefully considering the suitability of the Warrants in light of
their particular circumstances. The Warrants are not suitable for persons
solely dependant upon a fixed income, for retirement plan accounts or for
accounts under the Uniform Gift to Minors Act. INVESTORS SHOULD BE PREPARED
TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS.
6
<PAGE>
DESCRIPTION OF THE WARRANTS
GENERAL
An aggregate of 2,200,000 Warrants were issued. The Warrants were issued
under a Warrant Agreement (the "Warrant Agreement"), dated as of November
3, 1994, between the Company and Citibank, N.A., as Warrant Agent (the
"Warrant Agent"). The following statements with respect to the Warrants are
summaries of the detailed provisions of the Warrant Agreement, the form of
which is filed as an exhibit to the Registration Statement. Wherever
particular provisions of the Warrant Agreement or terms defined therein are
referred to, such provisions or definitions are incorporated by reference
herein as a part of the statements made, and the statements are qualified
in their entirety by such reference.
A Warrant will not require, or entitle, a Holder to sell or purchase a
U.S. Treasury security to or from the Company. The Company will make only a
cash settlement, if any, with respect to the Warrants.
The Warrants will expire on January 25, 1996 (the "Expiration Date") or
on such earlier date as described under "Exercise of Warrants" and
"Automatic Exercise Prior to the Expiration Date". The Warrants will be
automatically exercised on the Exercise Date, as set forth under "Exercise
of Warrants", and are not exercisable at the option of the Holder. The term
"New York Business Day", as used herein, means any day other than a
Saturday or a Sunday or a day on which commercial banks in The City of New
York are required or authorized by law or executive order to be closed.
The Warrants are unsecured contractual obligations of the Company and
rank on a parity with the Company's other unsecured contractual obligations
and with the Company's unsecured and unsubordinated debt. However, since
the Company is a holding company, the right of the Company, and hence the
right of creditors of the Company (including Holders of the Warrants), to
participate in any distribution of the assets of any subsidiary upon its
liquidation or reorganization or otherwise is necessarily subject to the
prior claims of creditors of the subsidiary, except to the extent that
claims of the Company itself as a creditor of the subsidiary may be
recognized. In addition, dividends, loans and advances from certain
subsidiaries, including Merrill Lynch, Pierce, Fenner & Smith Incorporated,
to the Company are restricted by net capital requirements under the
Securities Exchange Act of 1934, as amended, and under rules of certain
exchanges and other regulatory bodies.
EXERCISE OF WARRANTS
The Warrants are not exercisable at the option of the Holder. The
Warrants will be automatically exercised on the fifth New York Business Day
immediately preceding the Expiration Date or, if an Early Expiration Date
occurs, the New York Business Day immediately preceding the Early
Expiration Date (the "Exercise Date").
The Warrant Agent will obtain the Spot Yield on the Exercise Date from
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Calculation
Agent"), an affiliate of the Company, and determine the Cash Settlement
Value of the Warrants. The Warrant Agent will pay the Cash Settlement Value
of a Warrant to the Securities Depository by check on the Expiration Date
and, if January 25, 1996 is not a New York Business Day, on the next
succeeding New York Business Day. If an Early Expiration Date occurs, as
described below under "Automatic Exercise Prior to the Expiration Date",
the Warrant Agent will pay the Cash Settlement Value of a Warrant to the
Securities Depository by check on the fifth New York Business Day following
the Early Expiration Date. See "Description of the Warrants--Book-Entry
Procedures and Settlement".
CASH SETTLEMENT VALUE
The Cash Settlement Value of a Warrant will be determined on the Exercise
Date as the amount which is the greater of:
(i) $100 x 4 x (Spot Yield - Strike Yield), and
(ii) $0.
7
<PAGE>
The "Strike Yield" equals 6.78%. The "Spot Yield" will equal the CMT
Yield on the Exercise Date and the CMT Yield will be determined by the
Calculation Agent as follows:
(i) The CMT Yield will equal the rate which appears on Telerate Page
7052, "WEEKLY AVG YIELDS ON TREASURY CONSTANT MATURITIES ", under the
column entitled "2 YR", which appears as of 2:30 p.m., New York time, on
the Exercise Date. "Telerate Page 7052" means the display designated as
page 7052 on the Dow Jones Telerate Service (or such page as may replace
page 7052 on that service). The rate which appears on Telerate Page 7052
under the column entitled "2 YR" is the rate described in paragraph (ii)
below published in the most recent H.15(519) (as defined below).
(ii) If the CMT Yield as described in clause (i) is not available by
2:30 p.m., New York City time, on the Exercise Date, the CMT Yield will
equal the one-week average yield on 2-year United States Treasury
securities at "constant maturity", as published in the most recent
H.15(519) available on the Exercise Date, in the column "Week Ending" for
the most recent date opposite the heading "Treasury constant maturities,
2-Year." "H.15(519)" means the weekly statistical release designated as
such, published by the Board of Governors of the Federal Reserve System.
(iii) If the most recent H.15(519) available on the Exercise Date as
described in clause (ii) above was published more than fourteen calendar
days prior to the Exercise Date, the CMT Yield will equal the one-week
average yield on 2-year United States Treasury securities at "constant
maturity" as otherwise announced by the Federal Reserve Bank of New York
on the Exercise Date for the preceding week.
(iv) If the CMT Yield as described in clause (iii) is not announced by
3:00 p.m., New York City time, on the Exercise Date, the CMT Yield will
be calculated by the Calculation Agent and will be a yield to maturity
(expressed as a bond equivalent and as a decimal rounded, if necessary,
to the nearest one hundred-thousandth of a percentage point with five
one-millionths of a percentage point rounded up, on the basis of a year
of 365 days, applied on a daily basis) based on the arithmetic mean of
the secondary market offer prices as of approximately 3:30 p.m., New York
City time, on the Exercise Date of three leading primary United States
government securities dealers in The City of New York selected by the
Calculation Agent (from five such dealers 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 approximately two years, a
remaining term to maturity of not less than one year and in an amount of
$100,000,000. If three or four (and not five) of such dealers are quoting
as described in this clause (iv), then the CMT Yield will be based on the
arithmetic mean of the bid prices obtained and neither the highest nor
lowest of such quotations will be eliminated.
(v) If fewer than three dealers selected by the Calculation Agent are
quoting as described in clause (iv), the CMT Yield will be calculated by
the Calculation Agent and will be a yield to maturity (expressed as a
bond equivalent and as a decimal rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point with five one-millionths of
a percentage point rounded up, on the basis of a year of 365 days, and
applied on a daily basis) based on the arithmetic mean of the secondary
market offer prices as of approximately 3:30 p.m., New York City time, on
the Exercise Date of three leading primary United States government
securities dealers in The City of New York selected by the Calculation
Agent (from five such dealers 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 approximately ten years, a remaining term to
maturity closest to two years and in an amount of $100,000,000. If three
or four (and not five) of such dealers are quoting as described in this
clause, then the CMT Yield will be based on the arithmetic mean of the
bid prices obtained and neither the highest nor lowest of such quotes
will be eliminated. If two Treasury Notes with an original maturity of
approximately ten years have remaining terms to maturity equally close to
two years, the quotes for the Treasury Note with the shorter remaining
term to maturity will be used.
The Cash Settlement Value will be rounded, if necessary, to the nearest
cent (with one-half cent being rounded upwards).
8
<PAGE>
Set forth below is an illustration of the Cash Settlement Values of
Warrants on the Exercise Date based on the Strike Yield equal to 6.78% and
various hypothetical Spot Yields. The actual Cash Settlement Value of a
Warrant will depend entirely on the actual Spot Yield on the Exercise Date.
The illustrative Cash Settlement Values in the table do not reflect any
"time value" for a Warrant, which may be reflected in trading value, and
are not necessarily indicative of potential profit or loss, which are also
affected by purchase price and transaction costs.
<TABLE>
<CAPTION>
HYPOTHETICAL CASH SETTLEMENT
CMT SPOT YIELD VALUE OF A WARRANT
- ---------------- ------------------
<S> <C>
5.78%........... $0.00
6.28%........... $0.00
6.78%........... $0.00
7.28%........... $2.00
7.78%........... $4.00
8.28%........... $6.00
8.78%........... $8.00
</TABLE>
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Upon issuance, all Warrants were represented by one registered global
currency Warrant (the "Global Warrant"). The Global Warrant was deposited
with, or on behalf of, The Depository Trust Company, as Securities
Depository, and registered in the name of the Securities Depository or a
nominee thereof. Unless and until it is exchanged in whole or in part for
Warrants in definitive form in the limited circumstances described below,
the Global Warrant may not be transferred except as a whole by the
Securities Depository to a nominee of such Securities Depository or by a
nominee of such Securities Depository to such Securities Depository or
another nominee of such Securities Depository or by such Securities
Depository or any such nominee to a successor of such Securities Depository
or a nominee of such successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provision of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold 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 Securities
Depository's participants include securities brokers and dealers (including
the Underwriter), banks, trust companies, clearing corporations, and
certain other organizations, some of whom (and/or their representatives)
own the Securities Depository. Access to the Securities Depository book-
entry system is also available to others, such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship
with a participant, either directly or indirectly. Persons who are not
participants may beneficially own securities held by the Securities
Depository only through participants.
Ownership of beneficial interests in the Warrants is limited to persons
that have accounts with the Securities Depository ("Agent Members") or
persons that may hold interests through Agent Members. The Securities
Depository has advised the Company that upon the issuance of the Global
Warrant representing the Warrants, the Securities Depository will credit,
on its book-entry registration and transfer system, the Agent Members'
accounts with the respective principal amounts of the Warrants represented
by the Global Warrant. Ownership of beneficial interests in the Global
Warrant will be shown on, and the transfer of such ownership interests will
be effected only through, records maintained by the Securities Depository
(with respect to interests of Agent Members) and on the records of Agent
Members (with respect to interests of persons held through Agent Members).
The laws of some states may 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 own, transfer or pledge beneficial
interests in the Global Warrant.
9
<PAGE>
So long as the Securities Depository, or its nominee, is the registered
owner of the Global Warrant, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the
Warrants represented by the Global Warrant for all purposes under the
Warrant Agreement. Except as provided below, owners of beneficial interests
in the Global Warrant will not be entitled to have the Warrants represented
by the Global Warrant registered in their names, will not receive or be
entitled to receive physical delivery of the Warrants in definitive form
and will not be considered the owners or Holders thereof under the Warrant
Agreement. Accordingly, each person owning a beneficial interest in the
Global Warrant must rely on the procedures of the Securities Depository
and, if such person is not an Agent Member, on the procedures of the Agent
Member through which such person owns its interest, to exercise any rights
of a Holder under the Warrant Agreement. 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 Warrant desires to give or take any action which a Holder is
entitled to give or take under the Warrant Agreement, the Securities
Depository would authorize the Agent Members holding the relevant
beneficial interests to give or take such action, and such Agent Members
would authorize beneficial owners owning through such Agent Members to give
or take such action or would otherwise act upon the instructions of
beneficial owners through them.
The Cash Settlement Value in exercise of Warrants registered in the name
of the Securities Depository or its nominee will be paid by the Warrant
Agent to the Securities Depository. None of the Company, the Warrant Agent
or any other agent of the Company or agent of the Warrant Agent will have
any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Securities Depository upon receipt
of payment of the Cash Settlement Value in respect of the Global Warrant,
will credit the accounts of the Agent Members with payment in amounts
proportionate to their respective beneficial interests in the Global
Warrant, as shown on the records of the Securities Depository. The Company
also expects that payments by Agent Members to owners of beneficial
interests in the Global Warrant will be governed by standing customer
instructions and customary practices, as is now the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of such Agent Members. It is
suggested that purchasers of Warrants with accounts at more than one
brokerage firm effect transactions in the Warrants, only through the
brokerage firm or firms which hold that purchaser's Warrants.
If the Securities Depository is at any time unwilling or unable to
continue as depository and a successor Securities Depository is not
appointed by the Company within 90 days or if the Company is subject to
certain events in bankruptcy, insolvency or reorganization, the Company
will issue Warrants in definitive form in exchange for the Global Warrant.
In addition, the Company may at any time determine not to have the Warrants
represented by the Global Warrant and, in such event, will issue Warrants
in definitive form in exchange for the Global Warrant. In any such
instance, an owner of a beneficial interest in the Global Warrant will be
entitled to have a number of Warrants equivalent to such beneficial
interest registered in its name and will be entitled to physical delivery
of such Warrants in definitive form.
LISTING OF THE WARRANTS
The Warrants have been listed on the American Stock Exchange under the
symbol "YIX.WS". The American Stock Exchange expects to cease trading the
Warrants on such Exchange as of the close of business on the Expiration
Date.
AUTOMATIC EXERCISE PRIOR TO THE EXPIRATION DATE
In the event that the Warrants are delisted from, or permanently
suspended from trading on, the American Stock Exchange and the Warrants are
not simultaneously accepted for trading pursuant to the rules of another
self-regulatory organization whose rules are filed with the Securities and
Exchange Commission (a "Self-Regulatory Organization") under the Securities
Exchange Act of 1934, as amended, the Warrants will expire on the date such
delisting or trading suspension becomes effective (an "Early Expiration
Date") and the Warrants will be automatically exercised on the New York
Business Day immediately preceding such Early Expiration Date, and the Cash
10
<PAGE>
Settlement Value, if any (determined as provided under "Exercise of
Warrants"), of such automatically exercised Warrants will be paid on the
fifth New York Business Day following such Early Expiration Date.
Settlement shall otherwise occur as described under "Book-Entry Procedures
and Settlement". The Company will notify Holders as soon as practicable of
such delisting or trading suspension. The Company has agreed in the Warrant
Agreement that it will not seek delisting of the Warrants or suspension of
their trading on the American Stock Exchange.
The Warrants may also expire on the date of occurrence of certain events
in bankruptcy, insolvency or reorganization involving the Company (any such
date also being an "Early Expiration Date") and the Warrants will be
automatically exercised as of the New York Business Day immediately
preceding such Early Expiration Date. The Cash Settlement Value, if any
(determined as provided under "Exercise of Warrants"), of such
automatically exercised Warrants will be due and payable on the fifth New
York Business Day following such Early Expiration Date. Settlement will
otherwise occur as described under "Book-Entry Procedures and Settlement".
MODIFICATION
The Warrant Agreement and the terms of the Warrants may be amended by the
Company and the Warrant Agent, without the consent of the Holders of any
Warrants, for the purpose of curing any ambiguity, or of curing, correcting
or supplementing any defective or inconsistent provision contained therein,
or in any other manner which the Company may deem necessary or desirable
and which will not materially and adversely affect the interests of the
Holders of the Warrants.
The Company and the Warrant Agent also may modify or amend the Warrant
Agreement and the terms of the Warrants, with the consent of the Holders of
not less than a majority in number of the then outstanding Warrants
affected, provided that no such modification or amendment that changes the
Spot Yield so as to adversely affect the Holder, shortens the period of
time remaining to the Expiration Date or otherwise materially and adversely
affects the exercise rights of the Holders of the Warrants or reduces the
percentage of the number of outstanding Warrants, the consent of whose
Holders is required for modification or amendment of a Warrant Agreement or
the terms of Warrants may be made without the consent of the Holders of
Warrants affected thereby.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other corporation,
and the Company may sell, lease or convey all or substantially all of its
assets to any corporation, provided that the corporation (if other than the
Company) formed by or resulting from any such consolidation or merger or
which shall have received such assets shall be a corporation organized and
existing under the laws of the United States of America or a state thereof
and shall assume payment of the Cash Settlement Value with respect to all
unexercised Warrants, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of the
Warrant Agreement and of the Global Warrant to be performed by the Company.
11
<PAGE>
CMT YIELD
U.S. Treasury securities, including those used to calculate the CMT
Yield, are direct obligations of the United States government and carry the
full faith and credit of the United States of America. The Warrants,
however, are solely the obligation of the Company and are not backed by the
full faith and credit of the United States. If the CMT Yield is determined
using yields reported on Telerate Page 7052, in H.15(519) or as reported by
the Federal Reserve Bank of New York as described in "Description of the
Warrants--Cash Settlement Value", the CMT Yield will be a one-week average
yield on 2-year United States Treasury securities at "constant maturity"
(the "Weekly CMT Yield"). Yields on Treasury securities at "constant
maturity" used to calculate the Weekly CMT Yield are interpolated from the
daily yield curve. This curve, which relates the yield on a security to its
time to maturity, is based upon the market yields on actively traded
Treasury securities in the over-the-counter market. The constant maturity
yield values are derived from the yield curve at fixed maturities. This
method permits estimation of the yield for a two year maturity, even if no
outstanding security has exactly two years remaining to maturity. If the
Weekly CMT Yield cannot be calculated, the CMT Yield will be determined
based on the yield to maturity of certain Treasury securities on the
Exercise Date based on secondary market offer prices of certain dealers as
more fully described in "Description of the Warrants--Cash Settlement
Value". The value of the CMT Yield during the term of the Warrants will
likely not be calculated based on one specific Treasury security.
A potential investor should review the historical performance of the CMT
Yield. The historical performance of the CMT Yield should not be taken as
an indication of future performance, and no assurance can be given that the
CMT Yield will increase sufficiently to cause the Cash Settlement Value
with respect to the Warrants to be greater than zero.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
12
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
NIKKEI STOCK INDEX 300/*/ CALL WARRANTS
EXPIRING FEBRUARY 3, 1997
-----------------------------
On February 8, 1995, Merrill Lynch & Co., Inc. (the "Company") issued
1,000,000 Nikkei Stock Index 300 Call Warrants, Expiring February 3, 1997 (the
"Warrants"). Each Warrant will entitle the beneficial owner thereof to receive
from the Company upon exercise (including automatic exercise) an amount in U.S.
dollars computed by reference to increases in the Nikkei Stock Index 300 (the
"Index"). Such amount (the "Cash Settlement Value") will equal the product, if
positive, of $25 multiplied by the Percentage Change in the Index. The
"Percentage Change" will equal (i) the Index Spot Price minus the Index Strike
Price, divided by (ii) the Index Strike Price. The Cash Settlement Value cannot
be less than zero. The Index Strike Price equals 268.85 and the Index Spot Price
will be determined upon exercise as more fully described herein.
The Warrants are exercisable at the option of the beneficial owner from
the date of the initial delivery of the Warrants until 1:00 p.m., New York City
time, on the second New York Business Day immediately preceding the earlier of
their expiration on February 3, 1997 (the "Expiration Date"), cancellation, or
the date of their earlier expiration upon delisting from, or permanent
suspension of trading on, the American Stock Exchange (the "AMEX") unless the
Warrants are simultaneously accepted for trading pursuant to the rules of
another Self-Regulatory Organization (as defined herein). Any Warrant not
exercised at or before 1:00 p.m., New York City time, on the second New York
Business Day immediately preceding the Expiration Date or the date of their
earlier expiration will be deemed automatically exercised on the first New York
Business Day preceding the Expiration Date or, in the case of early expiration,
on the New York Business Day immediately preceding the Early Expiration Date (as
defined herein). A beneficial owner may exercise no fewer than 100 Warrants at
any one time, except in the case of automatic exercise. The valuation of and
payment for any exercised Warrant (including automatic exercise) may be
postponed as a result of the occurrence of certain events. See "Description of
the Warrants". The Warrants were issued in book-entry form and, accordingly, no
beneficial owner of Warrants is entitled to receive a certificate representing
such Warrants.
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF EXPIRING
WORTHLESS. INVESTORS THEREFORE SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF THE
PURCHASE PRICE OF THEIR WARRANTS, AND ARE ADVISED TO CAREFULLY CONSIDER THE
INFORMATION UNDER "RISK FACTORS RELATING TO THE WARRANTS", "DESCRIPTION OF THE
WARRANTS", "DESCRIPTION OF THE WARRANTS--DELISTING OF THE WARRANTS" AND "THE
INDEX".
The Warrants have been listed on the AMEX under the symbol "NKC.WS".
-----------------------------
THESE WARRANTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This Prospectus may be used by the Underwriter in connection with offers
and sales related to market-making transactions in the Warrants. The Underwriter
may act as principal or agent in such transactions. Such sales will be made at
prices related to prevailing market prices at the time of sale. The
distribution of the Warrants will conform to the requirements set forth in the
applicable sections of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc.
-----------------------------
MERRILL LYNCH & CO.
-----------------------------
The date of this Prospectus is , 1995.
/*/The use of, and reference to, the term "Nikkei Stock Index 300" herein has
been consented to by Nihon Keizai Shimbun, Inc.
<PAGE>
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT
APPROVED OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
30, 1994, Quarterly Reports on Form 10-Q for the periods ended March 31,
1995 and June 30, 1995, and Current Reports on Form 8-K dated January 12,
1995, January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995,
March 9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995,
July 21, 1995, August 1, 1995, and August 2, 1995 filed pursuant to Section
13 of the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Warrants shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
IMPORTANT INFORMATION CONCERNING THE WARRANTS
A beneficial owner will receive a cash payment upon exercise only if
the Warrants have a Cash Settlement Value in excess of zero on the relevant
Valuation Date. The Warrants will be "in-the-money" (i.e., their Cash
Settlement Value will exceed zero) on the relevant Valuation Date only if,
as of such date, the value of the Index Spot Price is above the Index
Strike Price. If a Warrant is not exercised prior to its expiration and, on
the Valuation Date with respect to its expiration, the value of the Index
is less than or equal to the Index Strike Price, the Warrant will expire
worthless and the beneficial owner will have sustained a total loss of the
purchase price of such Warrant. Investors therefore should be prepared to
sustain a total loss of the purchase price of their Warrants.
3
<PAGE>
RISK FACTORS RELATING TO THE WARRANTS
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING THE RISK OF
EXPIRING WORTHLESS. INVESTORS THEREFORE SHOULD BE PREPARED TO SUSTAIN A
TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS. IT IS SUGGESTED THAT
INVESTORS CONSIDERING PURCHASING THE WARRANTS BE EXPERIENCED WITH RESPECT
TO OPTIONS AND OPTION TRANSACTIONS AND UNDERSTAND THE RISKS OF FOREIGN
STOCK INDEX TRANSACTIONS AND REACH AN INVESTMENT DECISION ONLY AFTER
CAREFULLY CONSIDERING ALL OF THE RISK FACTORS SET FORTH IN THIS SECTION OF
THIS PROSPECTUS, THE SUITABILITY OF THE WARRANTS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES AND ALL THE OTHER INFORMATION SET FORTH IN THIS
PROSPECTUS.
Underlying Stocks. The underlying stocks that constitute the Index
have been issued by Japanese companies. If a Successor Index is substituted
for the Index, such Successor Index would also be based upon stocks issued
by Japanese companies. Investments in securities indexed to the value of
Japanese equity securities involve certain risks. The Japanese securities
markets may be more volatile than U.S. or other securities markets and may
be affected by market developments in different ways than U.S. or other
securities markets. Direct or indirect government intervention to stabilize
the Japanese securities markets and cross-shareholdings in Japanese
companies may affect prices and volume of trading of Japanese equity
securities. There is generally less publicly available information about
Japanese companies than about U.S. companies that are subject to the
reporting requirements of the U.S. Securities and Exchange Commission.
Also, Japanese companies are subject to accounting, auditing and financial
reporting standards and requirements that differ from those to which U.S.
reporting companies are subject.
The Tokyo Stock Exchange (the "TSE") has adopted certain measures
intended to prevent any extreme short-term price fluctuation resulting from
order imbalances. These include daily price floors and ceilings intended to
prevent extreme fluctuations in individual stock prices. Any stock listed
on the TSE cannot be traded at a price outside of these limits which are
stated in absolute Japanese yen limits, and not percentage limits, from the
closing price of the stock on the previous day. In addition, when there is
a major order imbalance in a listed stock, the TSE posts a "special bid
quote" or a "special asked quote" for that stock at a specified higher or
lower price level than the stock's last sale price in order to solicit
counter orders and balance supply and demand for the stock. Investors
should also be aware that the TSE may suspend the trading of individual
stocks in certain limited and extraordinary circumstances including, for
example, unusual trading activity in that stock. As a result, variations in
the Index may be limited by price limitations on, or by suspension of
trading in, individual stocks which comprise the Index which may, in turn,
adversely affect the value of the Warrants or result in a Market Disruption
Event. See "Description of the Warrants--Extraordinary Events and Market
Disruption Events".
Important Considerations Relating to Japan. Securities prices in
Japan are subject to political, economic, financial and social factors that
apply in Japan. These factors (including the possibility that future
changes in the Japanese government's economic and fiscal policies, the
possible imposition of, or changes in, currency exchange laws or other
Japanese laws or restrictions applicable to Japanese companies or
investments in Japanese equity securities and the possibility of
fluctuations in the rate of exchange between currencies) could negatively
affect the Japanese securities markets. Moreover, the Japanese economy may
differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resources and self-sufficiency.
Exercise of Warrants. A beneficial owner may incur transaction costs
in connection with any exercise of Warrants. To the extent Warrants are
exercised, including Warrants exercised by the Underwriter or any of its
affiliates, the number of Warrants outstanding will decrease, which may
result in a decrease in the liquidity of the Warrants.
Certain Factors Affecting the Value of the Warrants. The Cash
Settlement Value of the Warrants at any time prior to expiration is
typically expected to be less than the Warrants' trading value at that
time. The difference between the trading value and the Cash Settlement
Value will reflect a number of factors, including a "time value" for the
Warrants. The "time value" of the Warrants will depend upon the length of
the period remaining to
4
<PAGE>
expiration, among other factors. The expiration date of the Warrants will
be accelerated should the Warrants be delisted or should their trading on
the AMEX be suspended permanently unless the Warrants simultaneously are
accepted for trading pursuant to the rules of another Self-Regulatory
Organization. Any such acceleration would result in the total loss of any
otherwise remaining "time value", and could occur when the Warrants are
out-of-the-money, thus resulting in total loss of the purchase price of the
Warrants. See "Description of the Warrants--Delisting of the Warrants".
Before exercising or selling Warrants, beneficial owners should carefully
consider the trading value of the Warrants, the value of the Index at the
time, the time remaining to expiration and the probable range of Cash
Settlement Values and any related transaction costs.
Investors should also consider factors affecting the economy of Japan.
See "The Index" below and "Important Considerations Relating to Japan"
above.
There can be no assurance as to how the Warrants will trade in the
secondary market or whether such market will be liquid. The trading value
of a Warrant is expected to be dependent upon a number of complex
interrelated factors, including those listed below. The expected
theoretical effect on the trading value of a Warrant of each of the factors
listed below, assuming in each case that all other factors are held
constant, is as follows:
(1) The Index. If the value of the Index increases, the trading
value of a Warrant is expected to increase. If the value of the Index
decreases, the trading value of a Warrant is expected to decrease. It
is possible that the trading value of a Warrant may decline even if
there is an increase in the value of the Index.
(2) The volatility of the Index. If the volatility of the Index
increases, the trading value of a Warrant is expected to increase. If
such volatility decreases, the trading value of a Warrant is expected
to decrease.
(3) The time remaining to the Expiration Date of the Warrants.
An index warrant is a "wasting asset," meaning that as the time
remaining to the Expiration Date decreases, the trading value of a
Warrant is expected to decrease.
(4) Interest rates in Japan and the United States. In general,
if U.S. interest rates increase, the trading value of the Warrants is
expected to decrease. If U.S. interest rates decrease, the trading
value of the Warrants is expected to increase. If interest rates in
Japan increase, the trading value of a Warrant is expected to
increase. If interest rates in Japan decrease, the trading value of a
Warrant is expected to decrease. Changes in Japanese interest rates
may affect the economy of Japan and, in turn, the Index, and the
trading value of the Warrants.
(5) Dividend rates in Japan. If dividend rates on the common
stocks underlying the Index increase, the trading value of a Warrant
is expected to decrease. If dividend rates on the common stocks
underlying the Index decrease, the trading value of a Warrant is
expected to increase. Changes in the dividend rates on the common
stocks underlying the Index may directly affect the value of the Index
and therefore the value of the Warrants as described above.
(6) Japanese yen/U.S. dollar exchange rates. The Cash
Settlement Value is based on a given level of the Index and will not
be affected by changes in the Japanese yen/U.S. dollar exchange rate.
However, a number of economic factors, including the Japanese yen/U.S.
dollar exchange rate, could affect the value of the Underlying Stocks
and, therefore, the value of the Index.
As noted above, these hypothetical scenarios are based on the assumption
that all other factors are held constant. In reality, it is unlikely that
only one factor would change in isolation, because changes in one factor
usually cause, or result from, changes in others. Some of the factors
referred to above are, in turn, influenced by the political and economic
factors discussed above.
5
<PAGE>
Minimum Exercise Amount. Except for cases of automatic exercise, a
beneficial owner must tender at least 100 Warrants at any one time in order
to exercise Warrants. Thus, except in cases of automatic exercise,
beneficial owners with fewer than 100 Warrants will need either to sell
their Warrants or to purchase additional Warrants, incurring transaction
costs in either case, in order to realize proceeds from their investment.
At any time that a beneficial owner must purchase additional Warrants in
order to have the minimum number of Warrants necessary to elect to
exercise, such beneficial owner will be subject to the secondary market for
Warrants at the time of any such purchase, including the risk that there
may be a limited number of Warrants available in such market at such time
and the other factors affecting the secondary market discussed above.
Furthermore, such beneficial owners incur the risk that there may be
differences between the trading value of the Warrants and the Cash
Settlement Value of such Warrants.
Maximum Exercise Amount. All exercises of Warrants (other than on
automatic exercise) are subject, at the Company's option, to the limitation
that not more than 20% of the Warrants originally issued may be exercised
on any Exercise Date and not more than 10% of the Warrants originally
issued may be exercised by or on behalf of any beneficial owner, either
individually or in concert with any other beneficial owner, on any Exercise
Date. If any New York Business Day would otherwise, under the terms of the
Warrant Agreement, be the Exercise Date in respect to more than 20% of the
Warrants originally issued, then at the Company's election 20% of the
Warrants originally issued (provided, however, that no more than 10% of the
Warrants originally issued shall be exercised for the account of any
beneficial owner) shall be exercised on such Exercise Date (selected by the
Warrant Agent on a pro rata basis, but if, as a result of such pro rata
selection, any beneficial owner of Warrants would be deemed to have
exercised less than 100 Warrants, as the case may be, the Warrant Agent
shall first select an additional amount of such beneficial owner's Warrants
so that no beneficial owner shall be deemed to have exercised less than 100
Warrants), and the remainder of such Warrants (the "Remaining Warrants")
shall be deemed exercised on the following New York Business Day subject to
successive applications of this provision; provided that any Remaining
Warrants which were exercised on a prior Exercise Date shall be deemed
exercised before any other Warrants exercised on a subsequent Exercise
Date. As a result of any such postponed exercise, beneficial owners will
receive a Cash Settlement Value determined as of a date later than the
otherwise applicable Valuation Date. In any such case, as a result of any
such postponement, the Cash Settlement Value actually received by
beneficial owners may be lower than the otherwise applicable Cash
Settlement Value if the Valuation Date of the Warrants had not been
postponed.
Time Lag After Exercise Instructions Given. In the case of any
exercise of Warrants, there will be a time lag between the time a
beneficial owner gives instructions to exercise and the time the Index Spot
Price relating to such exercise is determined. Therefore, a beneficial
owner will not be able to determine, at the time of exercise of a Warrant,
the Index Spot Price that will be used in calculating the Cash Settlement
Value of such Warrant (and will thus be unable to determine such Cash
Settlement Value). The delay will, at a minimum, amount to almost an entire
day and could be much longer (e.g., an exercise notice received by the
Warrant Agent after 1:00 p.m. Friday would generally result in the Index
Spot Price being determined the following Tuesday). Any downward movement
in the level of the Index between the time a beneficial owner of a Warrant
exercises a Warrant and the time the Index Spot Price for such exercise is
determined will result in such beneficial owner receiving a Cash Settlement
Value that is less than the Cash Settlement Value anticipated by such
beneficial owner based on the closing level of the Index most recently
reported prior to exercise. A beneficial owner that has not exercised a
Warrant prior to the second New York Business Day preceding the Expiration
Date will, pursuant to the provision for automatic exercise, have the Index
Spot Price with respect to such Warrant determined on the Index Calculation
Day following the deemed exercise day. The value of the Index may change
significantly during any such period, and such movements could adversely
affect the Cash Settlement Value of the Warrants being exercised.
Further delay may occur if a Market Disruption Event or Extraordinary
Event has occurred, in which case the Cash Settlement Value in respect of
exercised Warrants will be calculated as of the next succeeding Index
Calculation Day on which there is no Market Disruption Event or
Extraordinary Event. If the Calculation Agent determines that on a
Valuation Date a Market Disruption Event or Extraordinary Event has
occurred, the Valuation Date shall be postponed to the first succeeding
Index Calculation Day on which no Market Disruption Event or
6
<PAGE>
Extraordinary Event occurs; provided that, if the Valuation Date has not
occurred on or prior to the fifth Index Business Day following an Exercise
Date because of Market Disruption Events, such fifth Index Business Day
shall be the Valuation Date regardless of whether a Market Disruption Event
has occurred on such day; provided further, however, that if an
Extraordinary Event has occurred and is continuing, and if the
Extraordinary Event is expected by the Company to continue, the Company may
immediately cancel the Warrants as described below under "Description of
the Warrants--Extraordinary Events and Market Disruption Events". During
any period of delay due to a Market Disruption Event or Extraordinary
Event, the value of the Index may change significantly, and such change may
adversely affect the amount paid on any Warrants exercised during such
period.
Time Difference. The Index is calculated on the basis of price
quotations for stocks underlying the Index from the TSE. There will be a
time difference between New York City time and the local time in Tokyo. To
the extent that the AMEX is closed while the TSE is open, significant
movements in the value of the Index may take place which will not be
reflected in the last sale price of a Warrant on the AMEX.
Automatic Exercise of the Warrants upon Delisting. In the event that
the Warrants are delisted from, or permanently suspended from trading on,
the AMEX and the Warrants are not simultaneously accepted for trading
pursuant to the rules of another self-regulatory organization that are
filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, (a "Self-Regulatory Organization"), such
Warrants not previously exercised will expire on the date such delisting or
trading suspension becomes effective and will be deemed automatically
exercised on the New York Business Day immediately preceding the date of
such early expiration. At the applicable Valuation Date with respect to
such automatic exercise, the Warrants may be out-of-the-money so that the
Cash Settlement Value would equal zero.
Warrants Not Standardized Options Issued by the Options Clearing
Corporation. The Warrants are not standardized stock index options of the
type issued by the Options Clearing Corporation (the "OCC"), a clearing
agency regulated by the Securities and Exchange Commission. For example,
unlike purchasers of OCC standardized options who have the credit benefits
of guarantees and margin and collateral deposits by OCC clearing members to
protect the OCC from a clearing member's failure, purchasers of Warrants
must look solely to the Company for performance of its obligations to pay
the Cash Settlement Value or Alternative Settlement Amount on the exercise
of Warrants. Further, the market for the Warrants is not expected to be
generally as liquid as the market for OCC standardized options.
The Warrants are unsecured contractual obligations of the Company and
will rank on a parity with the Company's other unsecured contractual
obligations and with the Company's unsecured and unsubordinated debt.
However, given that the Company is a holding company, the right of the
Company, and hence the right of creditors of the Company (including
beneficial owners of the Warrants), to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that claims of the Company itself as a
creditor of the subsidiary may be recognized. In addition, dividends, loans
and advances from certain subsidiaries, including Merrill Lynch, Pierce,
Fenner & Smith Incorporated, to the Company are restricted by net capital
requirements under the Securities Exchange Act of 1934, as amended, and
under rules of certain exchanges and other regulatory bodies.
General Risk Considerations. Options and warrants provide
opportunities for investment and pose risks to investors as a result of
fluctuations in the value of the underlying investment. In general, certain
of the risks associated with the Warrants are similar to those generally
applicable to other options or warrants of private corporate issuers.
However, unlike options or warrants on equities or debt securities, which
are traded primarily on the basis of the value of a single underlying
security, the trading value of a Warrant is likely to reflect primarily the
extent of the appreciation, if any, of the Index.
The purchaser of a Warrant may lose his entire investment. This risk
reflects the nature of a Warrant as an asset which tends to decline in
value over time and which may, depending on the relative value of the
Index, be worthless when it expires. Assuming all other factors are held
constant, the more a Warrant is out-of-the-money
7
<PAGE>
and the shorter its remaining term to expiration, the greater the risk that
a purchaser of the Warrant will lose all of his investment. This means that
the purchaser of a Warrant who does not sell it in the secondary market or
exercise it prior to expiration will necessarily lose his entire investment
in the Warrant if it expires when the Index Spot Price is less than or
equal to the Index Strike Price.
The fact that Warrants may become valueless upon expiration means
that, in order to recover and realize a return upon his investment, a
purchaser of a Warrant must generally be correct about the direction,
timing and magnitude of anticipated changes in the value of the Index. If
the value of the Index does not increase to an extent sufficient to cover
an investor's cost of a Warrant (i.e., the purchase price plus transaction
costs, if any) before the Warrant expires, the investor will lose all or a
part of his investment in the Warrant upon expiration.
The AMEX requires that Warrants be sold only to investors with options
approved accounts and that its members and member organizations and
registered employees thereof make certain suitability determinations before
recommending transactions in Warrants. It is suggested that investors
considering purchasing Warrants be experienced with respect to options and
option transactions and understand the risks of foreign stock index
transactions and reach an investment decision only after carefully
considering, with their advisers, the suitability of the Warrants in light
of their particular circumstances. Warrants are not suitable for persons
solely dependent upon a fixed income, for individual retirement plan
accounts or for accounts under the Uniform Gift to Minors Act. INVESTORS
SHOULD BE PREPARED TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR
WARRANTS.
In the event that the Index is not published by Nihon Keizai Shimbun,
Inc. ("NKS") but is published by another party acceptable to the
Calculation Agent, then the Index Spot Price for any date thereafter will
be determined based on the closing level of the Index as published by such
third party. If NKS or any third party discontinues publication of the
Index and publishes a successor or substitute index that the Calculation
Agent determines, in its sole discretion, to be comparable to the Index
(any such index being a "Successor Index"), then the Index Spot Price for
any date thereafter will be determined by the Calculation Agent on behalf
of the Company based on the closing level of the Successor Index on such
date. If NKS or any third party makes a material change in the formula for,
or the method of calculating, the Index or any Successor Index, the
Calculation Agent shall make such calculations as may be required to
determine the applicable Cash Settlement Value using the formula and method
of calculating the Index or any Successor Index as in effect prior to such
change or modification. If NKS and/or any third party discontinues
publication of the Index and/or any Successor Index, the Calculation Agent
will determine the applicable Cash Settlement Value based on the formula
and method used in calculating the Index or any Successor Index as in
effect on the date the Index or such Successor Index was last published.
The Underwriter and its affiliates may from time to time engage in
transactions involving the Underlying Stocks for their proprietary accounts
and for other accounts under their management, which may influence the
value of such Underlying Stocks and therefore the value of the Warrants.
The Underwriter and its affiliates will also be the writers of the hedge of
the Company's obligations under the Warrants and will be obligated to pay
to the Company upon exercise of Warrants an amount equal to the value of
the exercised Warrants. Accordingly, under certain circumstances, conflicts
of interest may arise between the Underwriter's responsibilities as
Calculation Agent with respect to the Warrants and its obligations under
its hedge and its status as a subsidiary of the Company. Under certain
circumstances, the duties of the Underwriter as Calculation Agent in
determining the existence of Extraordinary Events and Market Disruption
Events could conflict with the interests of the Underwriter as an affiliate
of the issuer of the Warrants, Merrill Lynch & Co., Inc., and with the
interests of the beneficial owners of the Warrants.
8
<PAGE>
DESCRIPTION OF THE WARRANTS
GENERAL
An aggregate of 1,000,000 Nikkei Stock Index 300 Call Warrants,
Expiring February 3, 1997 (the "Warrants") will be issued. The Warrants
were issued under a Warrant Agreement (the "Warrant Agreement"), dated as
of February 8, 1995, between the Company and Citibank, N.A., as Warrant
Agent (the "Warrant Agent"). The following statements with respect to the
Warrants are summaries of the detailed provisions of the Warrant Agreement,
the form of which is filed as an exhibit to the Registration Statement
relating to the Warrants. Wherever particular provisions of the Warrant
Agreement or terms defined therein are referred to, such provisions or
definitions are incorporated by reference as a part of the statements made,
and the statements are qualified in their entirety by such reference.
A Warrant will not require, or entitle, a beneficial owner to sell or
purchase any shares of any stock underlying the Index or any Successor
Index or any other securities to or from the Company. The Company will make
only a U.S. dollar cash settlement, if any, upon exercise of a Warrant. A
beneficial owner will not receive any interest on any Cash Settlement Value
or Alternative Settlement Amount and the Warrants will not entitle the
beneficial owners thereof to any of the rights of holders of any underlying
stock or other securities.
"Holder" means the person in whose name a certificate representing a
Warrant is registered in the records of the Warrant Agent.
The Warrants are immediately exercisable, as set forth under "Exercise
of Warrants". The Warrants will expire on February 3, 1997 (the "Expiration
Date") or may expire on an earlier date as described under "Automatic
Exercise". Warrants not exercised at or prior to 1:00 p.m., New York City
time, on the second New York Business Day immediately preceding the
Expiration Date or earlier expiration will be deemed automatically
exercised on the first New York Business Day preceding the Expiration Date
or, in the case of early expiration, on the New York Business Day
immediately preceding the Early Expiration Date. Warrants cancelled upon
the occurrence and continuation of an Extraordinary Event shall be
exercised as described below under "Extraordinary Events and Market
Disruption Events". The term "New York Business Day", as used herein, means
any day other than a Saturday or a Sunday or a day on which commercial
banks in The City of New York are required or authorized by law or
executive order to be closed, and "Index Business Day" means any day on
which the TSE is open for trading.
The Warrants will be unsecured contractual obligations of the Company
and will rank on a parity with the Company's other unsecured contractual
obligations and with the Company's unsecured and unsubordinated debt.
However, given that the Company is a holding company, the right of the
Company, and hence the right of creditors of the Company (including
beneficial owners of the Warrants), to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise is necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that claims of the Company itself as a
creditor of the subsidiary may be recognized. In addition, dividends, loans
and advances from certain subsidiaries, including Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("MLPF&S"), to the Company are restricted by
net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
CASH SETTLEMENT VALUE
The Cash Settlement Value of an exercised Warrant is an amount stated
in U.S. dollars that results from the following formula:
Percentage Change x $25
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<PAGE>
The "Percentage Change" will equal the following amount:
Index Spot Price-Index Strike Price
-----------------------------------
Index Strike Price
The "Index Spot Price" relating to any Exercise Date will be
determined by MLPF&S (the "Calculation Agent") and will equal the Closing
Index Value on the Valuation Date relating to such Exercise Date.
The "Index Strike Price" equals 268.85.
The "Index" means the Nikkei Stock Index 300, as presently calculated
and disseminated by NKS, except as otherwise provided herein. See
"Description of the Warrants--The Index".
The Cash Settlement Value will be rounded, if necessary, to the
nearest cent (with one-half cent being rounded upwards).
Set forth below are illustrations of the Cash Settlement Values for
Warrants at exercise based upon various hypothetical percentage changes in
the value of the Index. The Index Percentage Change on Valuation Date
column indicates the percentage increase or decrease in the value of the
Index Spot Price as compared to the Index Strike Price at the time of
exercise. The actual Cash Settlement Value of a Warrant will depend
entirely on the actual Index Percentage Change on the applicable Valuation
Date relating to the Exercise Date. The illustrative Cash Settlement Values
in the table do not reflect any "time value" for a Warrant, which may be
reflected in trading value, and are not necessarily indicative of potential
profit or loss, which are also affected by purchase price and transaction
costs.
10
<PAGE>
<TABLE>
<CAPTION>
INDEX PERCENTAGE CHANGE ON VALUATION DATE
- ------------------------------------------- CALL WARRANT
CASH SETTLEMENT VALUE
---------------------
<S> <C>
50% increase $12.50
45% increase 11.25
40% increase 10.00
35% increase 8.75
30% increase 7.50
25% increase 6.25
20% increase 5.00
15% increase 3.75
10% increase 2.50
5% increase 1.25
No change 0.00
5% decrease 0.00
10% decrease 0.00
15% decrease 0.00
20% decrease 0.00
25% decrease 0.00
30% decrease 0.00
35% decrease 0.00
40% decrease 0.00
45% decrease 0.00
50% decrease 0.00
</TABLE>
BOOK-ENTRY PROCEDURES AND SETTLEMENT
The Warrants are represented by one registered global Warrant (a
"Global Warrant"). The Global Warrant has been deposited with, or on behalf
of, The Depository Trust Company, as Securities Depository (the "Securities
Depository" or "DTC"), and registered in the name of the Securities
Depository or a nominee thereof. Unless and until the Global Warrant is
exchanged in whole or in part for Warrants in definitive form in the
limited circumstances described below, such Global Warrant may not be
transferred except as a whole by the Securities Depository to a nominee of
such Securities Depository or by a nominee of such Securities Depository to
such Securities Depository or another nominee of such Securities Depository
or by such Securities Depository or any such nominee to a successor of such
Securities Depository or a nominee of such successor. Morgan Guaranty Trust
Company of New York, Brussels office, as operator for the Euroclear System
("Euroclear") and Cedel, societe anonyme ("Cedel") will hold interests in
the Global Warrant on behalf of their participants through the facilities
of DTC.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold 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.
11
<PAGE>
The Securities Depository's participants include securities brokers and
dealers (including the Underwriter), banks, trust companies, clearing
corporations, and certain other organizations, some of whom (and/or their
representatives) own the Securities Depository. Access to the Securities
Depository book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own securities held by
the Securities Depository only through participants.
Ownership of beneficial interests in the Warrants will be limited to
persons that have accounts with the Securities Depository ("Agent Members")
or persons that may hold interests through Agent Members. The Securities
Depository has advised the Company that upon the issuance of the Global
Warrant representing the Warrants, the Securities Depository will credit,
on its book-entry registration and transfer system, the Agent Members'
accounts with the respective number of Warrants represented by such Global
Warrant. Ownership of beneficial interests in the Global Warrant will be
shown on, and the transfer of such ownership interests will be effected
only through, records maintained by the Securities Depository (with respect
to interests of Agent Members) and on the records of Agent Members (with
respect to interests of persons held through Agent Members). The laws of
some states may 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 own, transfer or pledge beneficial interests in
the Global Warrant.
So long as the Securities Depository, or its nominee, is the
registered owner of the Global Warrant, the Securities Depository or its
nominee, as the case may be, will be considered the sole owner or Holder of
the Warrants represented by the Global Warrant for all purposes under the
Warrant Agreement. Except as provided below, owners of beneficial interests
in the Global Warrant will not be entitled to have the Warrants represented
by such Global Warrant registered in their names, will not receive or be
entitled to receive physical delivery of such Warrants in definitive form
and will not be considered the owners or Holders thereof under the Warrant
Agreement. Accordingly, each person owning a beneficial interest in the
Global Warrant must rely on the procedures of the Securities Depository
and, if such person is not an Agent Member, on the procedures of the Agent
Member through which such person owns its interest, to exercise any rights
of a beneficial owner under the Warrant Agreement. 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
the Global Warrant desires to give or take any action which a beneficial
owner is entitled to give or take under the Warrant Agreement, the
Securities Depository would authorize the Agent Members holding the
relevant beneficial interests to give or take such action, and such Agent
Members would authorize beneficial owners owning through such Agent Members
to give or take such action or would otherwise act upon the instructions of
beneficial owners through them.
The Cash Settlement Value payable upon exercise of Warrants registered
in the name of the Securities Depository or its nominee will be paid by the
Warrant Agent to the Agent Members or, in the case of automatic exercise,
to the Securities Depository. None of the Company, the Warrant Agent or any
other agent of the Company or agent of the Warrant Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Warrant Agent, upon the receipt of
any payment of the Cash Settlement Value in respect of any portion of the
Global Warrant, will pay the relevant Agent Member in an amount
proportionate to its beneficial interest in such Global Warrant being
exercised and that such Agent Member will credit the accounts of the
beneficial owners of such Warrants. The Company expects that the Securities
Depository, in the case of automatic exercise, upon receipt of any payment
of the Cash Settlement Value in respect of all or any portion of the Global
Warrant, will credit the accounts of the Agent Members with payment in
amounts proportionate to their respective beneficial interests in the
portion of such Global Warrant so exercised, as shown on the records of the
Securities Depository. The Company also expects that payments by Agent
Members to owners of beneficial interests in the Global Warrant will be
governed by standing customer instructions and customary practices, as is
now the case with securities held for the accounts of customers in bearer
form or registered in "street name", and will be the responsibility of such
Agent Members. It is suggested that purchasers of Warrants with accounts at
more than one brokerage firm effect transactions in the Warrants, including
exercises, only through the brokerage firm or firms which hold that
purchaser's Warrants.
12
<PAGE>
If the Securities Depository is at any time unwilling or unable to
continue as depository and a successor Securities Depository is not
appointed by the Company within 90 days or if the Company is subject to
certain events in bankruptcy, insolvency or reorganization, the Company
will issue Warrants in definitive form in exchange for the Global Warrant.
In addition, the Company may at any time determine not to have the Warrants
represented by the Global Warrant and, in such event, will issue Warrants
in definitive form in exchange for the Global Warrant. In any such
instance, an owner of a beneficial interest in the Global Warrant will be
entitled to have a number of Warrants equivalent to such beneficial
interest registered in its name and will be entitled to physical delivery
of such Warrants in definitive form.
Cedel and Euroclear. Beneficial owners may hold their interests in
Warrants through Cedel or Euroclear if they are participants of such
systems, or indirectly through organizations which are participants in such
systems. Cedel and Euroclear will hold omnibus positions on behalf of their
participants through the facilities of DTC. All securities in Cedel or
Euroclear are held on a fungible basis without attribution of specific
certificates to specific securities clearance accounts.
Exercises of Warrants by persons holding through Cedel or Euroclear
participants will be effected through DTC, in accordance with DTC rules, on
behalf of the relevant European international clearing system by its
depositary; however, such transactions will require delivery of exercise
instructions to the relevant European international clearing system by the
participant in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the exercise meets its requirements,
deliver instructions to its depositary to take action to effect its
exercise of the Warrants on its behalf by delivering Warrants through DTC
and receiving payment in accordance with its normal procedures for next-day
funds settlement. Payments with respect to the Warrants held through Cedel
or Euroclear will be credited to the cash accounts of Cedel participants or
Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. See "Exercise and
Settlement of Warrants" herein.
Cedel is incorporated under the laws of Luxembourg as a professional
depository. Cedel holds securities for its participating organizations and
facilitates the clearance and settlement of securities transactions between
Cedel participants through electronic book-entry changes in accounts of
Cedel participants, thereby eliminating the need for physical movement of
certificates. Transactions may be settled in Cedel in any of 28 currencies,
including U.S. dollars. Cedel provides to its participants, among other
things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing.
Cedel interfaces with domestic markets in several countries. As a
professional depository, Cedel is subject to regulation by the Luxembourg
Monetary Institute. Cedel participants are recognized financial
institutions around the world, including underwriters, securities brokers
and dealers, banks, trust companies, clearing corporations and certain
other organizations and include an affiliate of the Underwriter. Indirect
access to Cedel is also available to others, such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a Cedel participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for
participants in the Euroclear System and to clear and settle transactions
between Euroclear participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers
of securities and cash. Transactions may now be settled in any of 27
currencies, including U.S. dollars. The Euroclear System includes various
other services, including securities lending and borrowing and interfaces
with domestic markets in several countries generally similar to the
arrangements of cross-market transfers with DTC described above. The
Euroclear System is operated by the Brussels, Belgium office of Morgan
Guaranty Trust Company of New York (the "Euroclear Operator") under
contract with Euroclear Clearance System S.C., a Belgium cooperative
corporation (the "Cooperative"). Morgan Guaranty Trust Company of New York
("Morgan") is a member bank of the United States Federal Reserve System.
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with
the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear participants.
Euroclear participants include banks (including central banks), securities
brokers and
13
<PAGE>
dealers and other professional financial intermediaries and include an
affiliate of the Underwriter. Indirect access to the Euroclear System is
also available to other firms that clear through or maintain a custodial
relationship with a Euroclear participant, either directly or indirectly.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System, and
applicable Belgian law (collectively, the "Terms and Conditions"). The
Terms and Conditions govern transfers of securities and cash within the
Euroclear System, withdrawal of securities and cash from the Euroclear
System, and receipt of payments with respect to securities in the Euroclear
System. All securities in the Euroclear System are held on a fungible basis
without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear participants and has no record of or
relationship with persons holding through Euroclear participants.
All information herein on Cedel and Euroclear is derived from Cedel or
Euroclear, as the case may be, and reflects the policies of such
organizations; such policies are subject to change without notice.
EXERCISE AND SETTLEMENT OF WARRANTS
The Warrants are immediately exercisable, subject to postponement upon
the occurrence of an Extraordinary Event or a Market Disruption Event as
described under "Extraordinary Events and Market Disruption Events" herein,
and will expire on February 3, 1997 (the "Expiration Date"). Warrants not
exercised (including by reason of any such postponed exercise) at or before
1:00 p.m., New York City time, on the earlier of (i) the second New York
Business Day immediately preceding the Expiration Date and (ii) the Early
Expiration Date, will be automatically exercised as described under
"Automatic Exercise" below, subject to earlier cancellation as described
below under "Extraordinary Events and Market Disruption Events". See
"Minimum Exercise Amount" and "Maximum Exercise Amount" below.
A beneficial owner may exercise the Warrants on any New York Business
Day until 1:00 p.m., New York City time, on the earlier of (i) the second
New York Business Day immediately preceding the Expiration Date and (ii)
the Early Expiration Date, by causing (x) such Warrants to be transferred
free to the Warrant Agent on the records of DTC and (y) a duly completed
and executed Exercise Notice to be delivered by an Agent Member on behalf
of the beneficial owner to the Warrant Agent. Forms of Exercise Notice may
be obtained from the Warrant Agent at the Warrant Agent's Office. The
Warrant Agent's telephone number and facsimile transmission number for this
purpose are (201) 262-5444 and (201) 262-7521, respectively.
In the case of Warrants held through the facilities of Cedel or
Euroclear, a beneficial owner may exercise such Warrants on any New York
Business Day during the period from the date of initial delivery of the
Warrants until 1:00 p.m., New York City time, on the earlier of (i) the
second New York Business Day immediately preceding the Expiration Date and
(ii) the Early Expiration Date by causing (x) such Warrants to be
transferred to the Warrant Agent, by giving appropriate instructions to the
participant holding such Warrants in either the Cedel or Euroclear system,
as the case may be, and (y) a duly completed and executed Exercise Notice
to be delivered on behalf of the beneficial owner by Cedel, in the case of
Warrants held through Cedel, or such participant, in the case of Warrants
held through Euroclear, to the Warrant Agent. Forms of Exercise Notice for
Warrants held through the facilities of either Cedel or Euroclear may be
obtained from the Warrant Agent at the Warrant Agent's Office or from Cedel
or Euroclear.
Except for Warrants subject to automatic exercise or held through the
facilities of Cedel or Euroclear, the "Exercise Date" for a Warrant will be
(i) the New York Business Day on which the Warrant Agent receives the
Warrant and Exercise Notice in proper form with respect to such Warrant, if
received at or prior to 1:00 p.m., New York City time, on such day, or (ii)
if the Warrant Agent receives such Warrant and Exercise Notice after 1:00
p.m., New York City time, on a New York Business Day, then the first New
York Business Day following such New York Business Day.
14
<PAGE>
In the case of Warrants held through the facilities of Cedel or
Euroclear, except for Warrants subject to automatic exercise, the "Exercise
Date" for a Warrant will be (i) the New York Business Day on which the
Warrant Agent receives the Exercise Notice in proper form with respect to
such Warrant if such Exercise Notice is received at or prior to 1:00 p.m.,
New York City time, on such day, provided that the Warrant is received by
the Warrant Agent by 1:00 p.m., New York City time, on the Valuation Date,
or (ii) if the Warrant Agent receives such Exercise Notice after 1:00 p.m.,
New York City time, on a New York Business Day, then the first New York
Business Day following such New York Business Day, provided that the
Warrant is received by 1:00 p.m., New York City time, on the Valuation Date
relating to exercises of Warrants on such succeeding New York Business Day.
In the event that the Warrant is received after 1:00 p.m., New York City
time, on the Valuation Date, then the Exercise Date for such Warrants will
be the first New York Business Day following the day on which such Warrants
are received. If a beneficial owner of Warrants held through the facilities
of Cedel or Euroclear has exercised Warrants by delivering an Exercise
Notice in proper form with respect to such Warrants and the Valuation Date
is expected not to be a New York Business Day, such beneficial owner should
make arrangements so that the Warrants are delivered prior to such
Valuation Date in order to ensure that the Exercise Date for such Warrants
is not postponed as described above. In the case of Warrants held through
the facilities of Cedel or Euroclear, in order to ensure proper exercise on
a given New York Business Day, participants in Cedel or Euroclear must
submit exercise instructions to Cedel or Euroclear, as the case may be, by
10:00 a.m., Luxembourg time, in the case of Cedel and by 10:00 a.m.,
Brussels time (by telex), or 11:00 a.m., Brussels time (by EUCLID), in the
case of Euroclear. In addition, in the case of book-entry exercises by
means of the Euroclear System, (i) participants must also transmit, by
facsimile (facsimile number (201) 262-7521), to the Warrant Agent a copy of
the Exercise Notice submitted to Euroclear by 1:00 p.m., New York City
time, on the desired Exercise Date and (ii) Euroclear must confirm by telex
to the Warrant Agent by 9:00 a.m., New York City time, on the Valuation
Date, that the Warrants will be received by the Warrant Agent on such date;
provided, that if such telex communication is received after 9:00 a.m., New
York City time, on the Valuation Date, the Company will be entitled to
direct the Warrant Agent to reject the related Exercise Notice or waive the
requirement for timely delivery of such telex communication.
To ensure that an Exercise Notice and the related Warrants will be
delivered to the Warrant Agent before 1:00 p.m., New York City time, on a
given New York Business Day, a beneficial owner may need to give exercise
instructions to his broker or other intermediary substantially earlier than
1:00 p.m., New York City time, on such day. Different brokerage firms may
have different cut-off times for accepting and implementing exercise
instructions from their customers. Therefore, beneficial owners should
consult with their brokers and other intermediaries, if applicable, as to
applicable cut-off times and other exercise mechanics.
Except in the case of Warrants subject to automatic exercise and for
Warrants that upon exercise will entitle the Holder thereof to receive an
Alternative Settlement Amount in lieu of the Cash Settlement Amount, if on
any Valuation Date the Cash Settlement Amount for any Warrants would be
zero, then the attempted exercise of any such Warrants will be void and of
no effect. Such Warrants will be transferred back to the Agent Member that
submitted them free on the records of DTC and, in any such case, such
beneficial owner will be permitted to re-exercise such Warrants prior to
the Expiration Date or the Early Expiration Date, as the case may be.
The "Valuation Date" for a Warrant will be the first Index Calculation
Day following the applicable Exercise Date, subject to postponement upon
the occurrence of an Extraordinary Event or a Market Disruption Event as
described below under "Extraordinary Events and Market Disruption Events"
or as a result of the exercise of a number of Warrants exceeding the limits
on exercise described below under "Maximum Exercise Amount". NKS has
indicated it will calculate the Index once on each Index Calculation Day
based upon the most recent official closing prices of each of the
Underlying Stocks as reported by the TSE. "Index Calculation Day" means any
day on which the TSE is open for trading and the Index or a Successor
Index, if any, is calculated and published. Due to time differences,
trading on the TSE occurs when the AMEX is closed for business. The
following is an illustration of the timing of an Exercise Date and the
ensuing Valuation Date, assuming (i) that all relevant dates are New York
Business Days and Index Calculation Days, (ii) the absence of any
intervening Extraordinary Event or Market Disruption Event and (iii) the
number of exercised Warrants does not exceed the maximum permissible
amount. If the Warrant Agent receives a beneficial owner's Warrants and
Exercise Notice in proper form at or prior
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to 1:00 p.m., New York City time, on Wednesday, February 8, 1995, the
Exercise Date for such Warrants will be February 8 and the Valuation Date
for such Warrants will be Thursday, February 9, 1995 (except that in the
case of Warrants held through the facilities of Cedel or Euroclear, the
Warrants must be received by 1:00 p.m., New York City time, on the
Valuation Date; if such Warrants are received after such time, then the
Exercise Date for such Warrants will be the day on which such Warrants are
received or, if such day is not a New York Business Day, the next
succeeding New York Business Day, and the Valuation Date for such Warrants
will be the first Index Calculation Day following such Exercise Date). The
Index Spot Price used to determine the Cash Settlement Value of such
Warrants will be the closing level of the Index on February 9 (i.e., the
level of the Index calculated using values for the Underlying Stocks as of
the close of the TSE on February 9 (assuming such day is an Index
Calculation Day), which, because of time differences, will occur at 1:00
a.m., New York City time, on February 9 (or 2:00 a.m., New York City time,
during the months in which Eastern Daylight Savings Time is in effect)).
Following receipt of Warrants and the related Exercise Notice in
proper form, the Warrant Agent will, not later than 5:00 p.m., New York
City time, on the applicable Valuation Date (or, if such Valuation Date is
not a New York Business Day, on the next succeeding New York Business Day)
(i) obtain the Index Spot Price from the Calculation Agent (which will be
the Closing Index Value on such Valuation Date), (ii) determine the Cash
Settlement Value of such Warrants and (iii) advise the Company of the
aggregate Cash Settlement Value of the exercised Warrants. The Company will
be required to make available to the Warrant Agent, no later than 3:00
p.m., New York City time, on the fourth New York Business Day following the
Valuation Date (or, if the Valuation Date is not a New York Business Day,
on the fourth New York Business Day following the New York Business Day
next succeeding the Valuation Date), funds in an amount sufficient to pay
such aggregate Cash Settlement Value. If the Company has made such funds
available by such time, the Warrant Agent will thereafter be responsible
for making funds available to each appropriate Agent Member (including
Citibank, N.A. and Morgan as custodians for Cedel and Euroclear,
respectively, who, in turn, will disburse payments to Cedel and Euroclear,
as the case may be, who will be responsible for disbursing such payments to
each of their respective participants, who, in turn, will be responsible
for disbursing payments to the beneficial owner it represents), and such
Participant will be responsible for disbursing such payments to the
beneficial owner it represents and to each brokerage firm for which it acts
as agent. Each such brokerage firm will be responsible for disbursing funds
to the beneficial owners it represents.
The "Closing Index Value" for any Valuation Date will equal the
closing value in Tokyo of the Index on such date.
"Calculation Agent" means MLPF&S or, in lieu thereof, another firm
selected by the Company to perform the functions of the Calculation Agent
in connection with the Warrants. The Calculation Agent is obligated to
carry out its duties and functions as Calculation Agent in good faith and
using its reasonable judgment. However, MLPF&S, in its capacity as
Calculation Agent, will have no obligation to take the interests of the
Company or the beneficial owners into consideration in the event it
determines, composes or calculates the Cash Settlement Value or Alternative
Settlement Amount. The Calculation Agent and its affiliates may from time
to time engage in transactions involving the Underlying Stocks for their
proprietary accounts and for other accounts under their management, which
may influence the value of such Underlying Stocks. The Calculation Agent
and its affiliates will also be the writers of the hedge of the Company's
obligations under the Warrants and will be obligated to pay to the Company
upon exercise of the Warrants an amount equal to the value of the Warrants.
Accordingly, under certain circumstances, conflicts of interest may arise
between the Calculation Agent's responsibilities as Calculation Agent with
respect to the Warrants and its obligations under its hedge and its status
as a subsidiary of the Company. In addition, because the Calculation Agent
is an affiliate of the Company, certain conflicts of interest may arise in
connection with the Calculation Agent performing its role as Calculation
Agent. The Calculation Agent, as a registered broker-dealer, is required to
maintain policies and procedures regarding the handling and use of
confidential proprietary information, and such policies and procedures will
be in effect throughout the term of the Warrants to restrict the use of
information relating to any calculation of the Cash Settlement Value prior
to its dissemination.
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AUTOMATIC EXERCISE
All Warrants for which the Warrant Agent has not received a valid
Exercise Notice at or prior to 1:00 p.m., New York City time, or for which
the Warrant Agent has received a valid Exercise Notice but with respect to
which timely delivery of the relevant Warrant has not been made, together
with any Warrants the Valuation Date for which has at such time been
postponed as described under "Extraordinary Events and Market Disruption
Events" below, on (i) the second New York Business Day immediately
preceding the Expiration Date, or (ii) the close of business on the New
York Business Day on which the Warrants are delisted from, or permanently
suspended from trading on, the AMEX and the Warrants are not simultaneously
accepted for trading pursuant to the rules of another self-regulatory
organization whose rules are filed with the Securities and Exchange
Commission (a "Self-Regulatory Organization") under the Securities Exchange
Act of 1934, as amended, (the "Early Expiration Date") will be deemed
automatically exercised on the New York Business Day immediately preceding
such Expiration Date or Early Expiration Date, as the case may be, (such
New York Business Day will be deemed the Exercise Date) and the Cash
Settlement Value, if any (determined as provided under "Exercise and
Settlement of Warrants"), of such automatically exercised Warrants will be
paid and settlement shall otherwise occur as described under "Book-Entry
Procedures and Settlement" and "Exercise and Settlement of Warrants". The
Company will notify Holders as soon as practicable of such delisting or
trading suspension. The Company agreed in the Warrant Agreement that it
will not seek delisting of the Warrants or suspension of their trading on
the AMEX.
In the event the Warrants are canceled by the Company because of the
continuance of an Extraordinary Event as described under "Extraordinary
Events and Market Disruption Events" below, Warrants not previously
exercised shall be automatically exercised on the basis that the Valuation
Date for such Warrants shall be the Cancellation Date, and the Alternative
Settlement Amount of such automatically exercised Warrants will be paid on
the fourth New York Business Day following such Valuation Date. Settlement
shall otherwise occur as described under "Book-Entry Procedures and
Settlement" and "Exercise and Settlement of Warrants".
MINIMUM EXERCISE AMOUNT
No fewer than 100 Warrants may be exercised by or on behalf of a
beneficial owner at any one time, except in the case of automatic exercise
or exercise upon cancellation of the Warrants as described under
"Extraordinary Events and Market Disruption Events" below. Accordingly,
except in the case of automatic exercise of the Warrants or upon
cancellation of the Warrants, beneficial owners with fewer than 100
Warrants, as the case may be, will need either to sell their Warrants or to
purchase additional Warrants, thereby incurring transaction costs, in order
to realize proceeds from their investment. Warrants held through one Agent
Member (including participants in Cedel or Euroclear) may not be combined
with Warrants held through another Agent Member in order to satisfy the
minimum exercise requirement.
MAXIMUM EXERCISE AMOUNT
All exercises of Warrants (other than on automatic exercise) are
subject, at the Company's option, to the limitation that not more than 20%
of the Warrants originally issued (provided, however, that no more than 10%
of the Warrants originally issued shall be exercised for the account of any
beneficial owner) may be exercised on any Exercise Date and not more than
10% of the Warrants originally issued may be exercised by or on behalf of
any beneficial owner, either individually or in concert with any other
beneficial owner, on any Exercise Date. If any New York Business Day would
otherwise, under the terms of the Warrant Agreement, be the Exercise Date
in respect to more than 20% of the Warrants originally issued, then at the
Company's election, 20% of the Warrants originally issued (provided,
however, that no more than 10% of the Call Warrants or the Warrants
originally issued shall be exercised for the account of any beneficial
owner) shall be deemed exercised on such Exercise Date (selected by the
Warrant Agent on a pro rata basis, but if, as a result of such pro rata
selection, any beneficial owner of Warrants would be deemed to have
exercised less than 100 Warrants, then the Warrant Agent shall first select
an additional amount of such beneficial owner's Warrants so that no
beneficial owner shall be deemed to have exercised less than 100 Warrants),
and the remainder of such warrants (the "Remaining Warrants") shall be
deemed
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<PAGE>
exercised on the following New York Business Day (subject to successive
applications of this provision); provided that any Remaining Warrants for
which an Exercise Notice was delivered on a given Exercise Date shall be
deemed exercised before any other Warrants for which an Exercise Notice was
delivered on a later Exercise Date. If any beneficial owner attempts to
exercise more than 10% of the Warrants originally issued on any New York
Business Day, then, at the Company's election, 10% of such Warrants shall
be deemed exercised on such New York Business Day and the remainder shall
be deemed exercised on the following New York Business Day (subject to
successive applications of this provision). As a result of any postponed
exercise as described above, such beneficial owners will receive a Cash
Settlement Value determined as of a date later than the otherwise
applicable Valuation Date. In any such case, as a result of any such
postponement, the Cash Settlement Value actually received by such
beneficial owners may be lower than the otherwise applicable Cash
Settlement Value if the Valuation Date of the Warrants had not been
postponed.
SUCCESSOR INDEX
If NKS discontinues publication of the Index and NKS or another entity
publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to the Index (any such
index being referred to herein as a "Successor Index"), then, upon the
Calculation Agent's notification of such determination to the Warrant Agent
and the Company, the Calculation Agent will substitute the Successor Index
as calculated by NKS or such other entity for the Index and calculate the
Cash Settlement Value upon an exercise as described above. Upon any
selection by the Calculation Agent of a Successor Index, the Company shall
promptly give notice to the beneficial owners by publication in a United
States newspaper with a national circulation (currently expected to be The
Wall Street Journal), within three New York Business Days of such
selection.
If NKS discontinues publication of the Index and a Successor Index is
not selected by the Calculation Agent or is no longer published on any
Valuation Date, the value to be substituted for the Index for any Valuation
Date used to calculate the Cash Settlement Value upon exercise will be a
value computed by the Calculation Agent on each Valuation Date in
accordance with the procedures last used to calculate the Index prior to
such discontinuance.
If a Successor Index is selected or the Calculation Agent calculates a
value as a substitute for the Index, such Successor Index or value shall be
substituted for the Index for all purposes, including for purposes of
determining whether a Market Disruption Event or Extraordinary Event
exists. If the Calculation Agent calculates a value as a substitute for the
Index, "Index Calculation Day" shall mean any day on which the Calculation
Agent is able to calculate such value.
If at any time the method of calculating the Index or any Successor
Index, as the case may be, or the value thereof, is changed in a material
respect, or if the Index is in any other way modified so that such Index
does not, in the opinion of the Calculation Agent, fairly represent the
value of the Index had such changes or modifications not been made, then,
from and after such time, the Calculation Agent shall, at the close of
business in New York, New York, on each Valuation Date, make such
adjustments as, in the good faith judgment of the Calculation Agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the Index or any Successor Index, as the case may be, as if
such changes or modifications had not been made, and calculate such Closing
Index Value with reference to the Index or any Successor Index, as the case
may be, as adjusted. Accordingly, if the method of calculating the Index or
any Successor Index, as the case may be, is modified so that the value of
such Index or such Successor Index is a fraction or a multiple of what it
would have been if it had not been modified (e.g., due to a split in the
Index), the Calculation Agent shall adjust the Index in order to arrive at
a value of the Index or such Successor Index as if it had not been modified
(e.g., as if such split had not occurred).
EXTRAORDINARY EVENTS AND MARKET DISRUPTION EVENTS
Extraordinary Events. The Warrant Agreement provides that if the
Calculation Agent determines that an Extraordinary Event has occurred and
is continuing on the Index Business Day with respect to which the Index
Spot Price on a Valuation Date is to be determined (the "Applicable Index
Business Day"), then the Cash Settlement
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Value in respect of an exercise shall be calculated on the basis that the
Valuation Date shall be the next Index Calculation Day following an
Applicable Index Business Day on which there is no Extraordinary Event or
Market Disruption Event; provided that if a Valuation Date has not occurred
on or prior to the Expiration Date or the Early Expiration Date, the
Holders will receive the Alternative Settlement Amount in lieu of the Cash
Settlement Value which shall be calculated as if the Warrants had been
cancelled on the Expiration Date or the Early Expiration Date, as the case
may be. The Company shall promptly give notice to the beneficial owners by
publication in a United States newspaper with a national circulation
(currently expected to be The Wall Street Journal), if an Extraordinary
Event shall have occurred.
"Extraordinary Event" means any of the following events:
(i) a suspension or absence of trading on the TSE of all the
Underlying Stocks which then comprise the Index or a Successor Index;
(ii) the enactment, publication, decree or other promulgation of any
statute, regulation, rule or order of any court or any other U.S. or non-
U.S. governmental authority that would make it unlawful for the Company to
perform any of its obligations under the Warrant Agreement or the Warrants;
or
(iii) any outbreak or escalation of hostilities or other national or
international calamity or crises (including, without limitation, natural
calamities that in the opinion of the Calculation Agent may materially and
adversely affect the economy of Japan or the trading of securities
generally on the TSE) that has or will have a material adverse effect on
the ability of the Company to perform its obligations under the Warrants or
to modify the hedge of its position with respect to the Index or the
Underlying Stocks.
For the purposes of determining whether an Extraordinary Event has
occurred: (1) a limitation on the hours or number of days of trading on the
TSE will not constitute an Extraordinary Event if it results from an
announced change in the regular business hours of the TSE and (2) an
"absence of trading" on the TSE will not include any time when the TSE
itself is closed for trading under ordinary circumstances.
If the Calculation Agent determines that an Extraordinary Event has
occurred and is continuing, and if the Extraordinary Event is expected by
the Calculation Agent to continue, the Company may immediately cancel all
outstanding Warrants by notifying the Warrant Agent of such cancellation
(the date such notice is given being the "Cancellation Date"), and each
beneficial owner's rights under the Warrants and the Warrant Agreement
shall thereupon cease; provided that each Warrant shall be automatically
exercised on the basis that the Valuation Date for such Warrant shall be
the Cancellation Date and the beneficial owner of each such Warrant will
receive, in lieu of the Cash Settlement Value of such Warrant, an amount
(the "Alternative Settlement Amount"), determined by the Calculation Agent,
which is the greater of (i) the average of the last sale prices, as
available, of the Warrants on the AMEX (or any successor securities
exchange on which the Warrants are listed) on the 30 trading days preceding
the date on which such Extraordinary Event was declared; provided that, if
the Warrants were not traded on the AMEX (or such successor securities
exchange) on at least 20 of such trading days, no effect will be given to
this clause (i) for the purpose of determining the Alternative Settlement
Amount, and (ii) the amount "X" calculated using the formula set forth
below:
T A
X = I + [ - x - ]
2 B
where
I = The Cash Settlement Value of the Warrants determined as described
under "Cash Settlement Value" above, but subject to the following
modifications:
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(1) if the Cancellation Date for such Warrants is a date on which the
Index or a Successor Index is calculated and published, for the purpose of
determining such Cash Settlement Value, the Index Spot Price will be
determined as of such Cancellation Date except that, if the Index Spot
Price as of such day is less than 90% of the Index Spot Price as of the
immediately preceding Index Calculation Day, then the Index Spot Price will
be deemed to be 90% of the Index Spot Price on such preceding Index
Calculation Day; or
(2) if the Cancellation Date for such Warrants is a date on which the
Index or a Successor Index is not calculated or published, for the purpose
of determining such Cash Settlement Value, the Index Spot Price will be
deemed to be the lesser of (i) the Index Spot Price as of the first Index
Calculation Day immediately preceding the Cancellation Date except that, if
the Index Spot Price as of such day is less than 90% of the Index Spot
Price as of the second Index Calculation Day immediately preceding such
Cancellation Date, 90% of the Index Spot Price as of such second Index
Calculation Day and (ii) the arithmetic average of four amounts, being (a)
the Index Spot Price at each of the three successive Index Calculation Days
immediately preceding the Cancellation Date and (b) the Index Spot Price at
the next Index Calculation Day, provided that if an Extraordinary Event
described in clause (i) of the definition of Extraordinary Event continues
for 30 consecutive days immediately following such Cancellation Date, then
the Calculation Agent shall calculate an amount which, in its reasonable
opinion, fairly reflects the value of the Underlying Stocks on the Index
Calculation Day immediately following such Cancellation Date which, subject
to approval by the Company (such approval not to be unreasonably withheld),
shall for purposes of calculating the amount under this clause (2)(ii) be
treated as the figure arrived at under clause (2)(ii)(b) above;
T = U.S.$3.4375, the initial offering price per Warrant
A = the total number of days from but excluding the Cancellation Date
for such Warrants to and including the Expiration Date; and
B = the total number of days from but excluding the date the Warrants
were initially sold to and including the Expiration Date.
For the purposes of determining "I" in the above formula, in the event
that the Calculation Agent and the Company are required to have, but have
not, after good faith consultation with each other and within five days
following the first day upon which such Alternative Settlement Amount may
be calculated in accordance with the above formula, agreed upon a figure
under clause (2)(ii)(b) which fairly reflects the value of the Underlying
Stocks on the Cancellation Date, then the Calculation Agent shall promptly
nominate a third party, subject to approval by the Company (such approval
not to be unreasonably withheld), to determine such figure and calculate
the Alternative Settlement Amount in accordance with the above formula.
Such party shall act as an independent expert and not as an agent of the
Company or the Calculation Agent, and its calculation and determination of
the Alternative Settlement Amount shall, absent manifest error, be final
and binding on the Company, the Warrant Agent, the Calculation Agent and
the Holders. Any such calculations will be made available to Holders for
inspection at the Warrant Agent's Office. Neither the Company nor such
third party shall have any responsibility for good faith errors or
omissions in calculating the Alternative Settlement Amount. Under certain
circumstances, the duties of MLPF&S as Calculation Agent in determining the
existence of Extraordinary Events could conflict with the interests of
MLPF&S as an affiliate of the issuer of the Warrants, Merrill Lynch & Co.,
Inc.
Market Disruption Events. If the Calculation Agent determines that
on a Valuation Date a Market Disruption Event has occurred and is
continuing, the Valuation Date shall be postponed to the first succeeding
Index Calculation Day on which no Market Disruption Event occurs; provided
that, if the Valuation Date has not occurred on or prior to the fifth Index
Business Day following an Exercise Date because of Market Disruption
Events, such fifth Index Business Day shall be the Valuation Date
regardless of whether a Market Disruption Event has occurred on such day.
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"Market Disruption Event" means with respect to any Index Business Day
the occurrence or existence during the one-half hour period that ends at
the determination of the Closing Index Value for such Index Business Day
of:
(i) a suspension, material limitation or absence of trading on
the TSE of 20% or more of the Underlying Stocks which then comprise
the Index or a Successor Index during the one-half hour period
preceding the close of trading on the applicable exchange; or
(ii) the suspension or material limitation on the Singapore
International Monetary Exchange, Ltd. (the "SIMEX"), the Osaka
Securities Exchange (the "OSE") or any other major futures or
securities market of trading in futures or options contracts related
to the Index or a Successor Index during the one-half hour period
preceding the close of trading on the applicable exchange.
For the purposes of determining whether a Market Disruption Event has
occurred: (i) a limitation on the hours or number of days of trading will
not constitute a Market Disruption Event if it results from an announced
change in the regular business hours of the relevant exchange, (ii) a
decision to permanently discontinue trading in the relevant futures or
options contract will not constitute a Market Disruption Event, (iii) a
suspension in trading in a futures or options contract on the Index by a
major securities market by reason of (a) a price change violating limits
set by such securities market, (b) an imbalance of orders relating to such
contracts or (c) a disparity in bid and ask quotes relating to such
contracts will constitute a suspension or material limitation of trading in
futures or options contracts related to the Index, (iv) an absence of
trading on the TSE will not include any time when the TSE is closed for
trading under ordinary circumstances, and (v) the occurrence of an
Extraordinary Event described in Clause (i) of Extraordinary Event will not
constitute, and will supersede the occurrence of, a Market Disruption
Event. Under certain circumstances, the duties of MLPF&S as Calculation
Agent in determining the existence of Market Disruption Events could
conflict with the interests of MLPF&S as an affiliate of the issuer of the
Warrants, Merrill Lynch & Co., Inc.
LISTING OF THE WARRANTS
The Warrants have been listed on the AMEX under the symbol "NKC.WS".
The AMEX expects to cease trading the Warrants on such Exchange as of the
close of business on the Expiration Date.
MODIFICATION
The Warrant Agreement and the terms of the Warrants may be amended by
the Company and the Warrant Agent without the consent of the beneficial
owners of any Warrants for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective or inconsistent provision
contained therein, or in any other manner which the Company may deem
necessary or desirable and which will not materially and adversely affect
the interests of the beneficial owners of the Warrants.
The Company and the Warrant Agent also may modify or amend the Warrant
Agreement and the terms of the Warrants, with the consent of the beneficial
owners of not less than a majority in number of the then outstanding
Warrants affected, provided that no such modification or amendment that
changes the Index Strike Price so as to adversely affect the beneficial
owner, shortens the period of time during which the Warrants may be
exercised or otherwise materially and adversely affects the exercise rights
of the beneficial owners of the Warrants or reduces the percentage of the
number of outstanding Warrants, the consent of whose beneficial owners is
required for modification or amendment of such Warrant Agreement or the
terms of such Warrants may be made without the consent of the beneficial
owners of Warrants affected thereby.
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MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other
corporation, and the Company may sell, lease or convey all or substantially
all of its assets to any corporation, provided that the corporation (if
other than the Company) formed by or resulting from any such consolidation
or merger or which shall have received such assets shall be a corporation
organized and existing under the laws of the United States of America or a
state thereof and shall assume payment of the Cash Settlement Value or
Alternative Settlement Amount with respect to all unexercised Warrants,
according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions of the Warrant Agreement
and of the Warrants to be performed by the Company.
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THE INDEX
Unless otherwise stated, all information herein on the Index is
derived from NKS or other publicly available sources as of January 6, 1995.
Such information reflects the policies of NKS as stated in such sources and
such policies are subject to change by NKS. NKS is under no obligation to
continue to publish the Index and may discontinue publication of the Index
at any time.
The Nikkei Stock Index 300 is an index calculated, published and
disseminated by NKS, and measures the composite price performance of stocks
of 300 Japanese companies. All 300 stocks are listed in the First Section
of the TSE. Stocks listed in the First Section are among the most actively
traded stocks on the TSE. Publication of the Nikkei Stock Index 300 began
on October 8, 1993.
The Nikkei Stock Index 300 is a market capitalization-weighted index
which is calculated by (i) multiplying the per share price of each stock
included in the Nikkei Stock Index 300 by the number of outstanding shares
(excluding shares held by the Japanese Government), (ii) calculating the
sum of all these products (such sum being hereinafter referred to as the
"Aggregate Market Price"), (iii) dividing the Aggregate Market Price by the
Base Aggregate Market Price (i.e., the Aggregate Market Price as of October
1, 1982, as calculated by NKS) and (iv) multiplying the result by 100.
Because of such capitalization-weighting, movements in share prices of
companies with relatively larger market capitalization will have a greater
effect on the level of the entire Nikkei Stock Index 300 than will
movements in share prices of companies with relatively smaller market
capitalization.
Although the Nikkei Stock Index 300 was first published in October
1993, NKS has calculated values for the Nikkei Stock Index 300 for the
period from October 1, 1982 through October 8, 1993. The stocks included in
the Nikkei Stock Index 300 (such stocks or any stocks included in any
Successor Index being herein referred to as the "Underlying Stocks") were
selected from a reference group of stocks which were selected by excluding
stocks listed in the First Section of the TSE that have relatively low
market liquidity or extremely poor financial results. The Underlying Stocks
were selected from this reference group by (i) selecting from the remaining
stocks in this reference group the stocks with the largest aggregate market
value in each of 36 industrial sectors and (ii) selecting additional stocks
(with priority within each industrial sector given to the stock with the
largest aggregate market value) so that the selection ratios (i.e., the
ratio of the aggregate market value of the included stocks to that of the
stocks in the reference group) with respect to all 36 industry sectors will
be as nearly equal as possible and the total number of companies with
stocks included in the Nikkei Stock Index 300 will be 300.
In order to maintain continuity in the level of the Nikkei Stock Index
300, the Nikkei Stock Index 300 will be reviewed annually by NKS and the
Underlying Stocks may be replaced, if necessary, in accordance with the
"deletion/addition" rules. The "deletion/addition" rules provide generally
for the deletion of a stock from the Nikkei Stock Index 300 if such stock
is no longer included in the reference group or if the aggregate market
value of such stock is low relative to other stocks in the relevant
industry sector. Stocks deleted pursuant to the "deletion/addition" rules
will be replaced by stocks included in the reference group which have
relatively high aggregate market values. In addition, stocks may be added
or deleted from time to time for extraordinary reasons.
All disclosure contained in this Prospectus regarding the Nikkei Stock
Index 300, or its publisher is derived from publicly available information.
All copyrights and other intellectual property rights relating to the Index
are owned by NKS. NKS has no relationship with the Company or the Warrants;
it does not sponsor, endorse, authorize, sell or promote the Warrants, and
has no obligation or liability in connection with the administration,
marketing or tradings of the Warrants.
A potential investor should review the historical performance of the
Index. The historical performance of the Index should not be taken as an
indication of future performance, and no assurance can be given than the
Index will increase sufficiently to cause the Cash Settlement Value with
respect to the Warrants to be greater than zero.
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THE TOKYO STOCK EXCHANGE
The TSE is one of the world's largest securities exchanges in terms of
market capitalization. TSE is a two-way, continuous pure auction market. As
of January 6, 1995, trading hours were from 9:00 a.m. to 11:00 a.m. and
from 1:00 p.m. to 3:00 p.m., Tokyo time, Monday through Friday.
Due to the time zone difference, on any normal trading day the TSE
will close prior to the opening of business in New York City on the same
calendar day. Therefore, the closing level of the Index on such trading day
will generally be available in the United States by the opening of business
on the same calendar day.
The TSE has adopted certain measures intended to prevent any extreme
short-term price fluctuation resulting from order imbalances. These include
daily price floors and ceilings intended to prevent extreme fluctuations in
individual stock prices. Any stock listed on the TSE cannot be traded at a
price outside of these limits which are stated in absolute Japanese yen,
and not percentage, limits from the closing price of the stock on the
previous day. In addition, when there is a major order imbalance in a
listed stock, the TSE posts a "special bid quote" or a "special asked
quote" for that stock at a specified higher or lower price level than the
stock's last sale price in order to solicit counter orders and balance
supply and demand for the stock. Investors should also be aware that the
TSE may suspend the trading of individual stocks in certain limited and
extraordinary circumstances including, for example, unusual trading
activity in that stock. As a result, variations in the Index may be limited
by price limitations on, or by suspension of trading in, individual stocks
which comprise the Index which may, in turn, adversely affect the value of
the Warrants or result in a Market Disruption Event. See "Description of
the Warrants--Extraordinary Events and Market Disruption Events".
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
24
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
GREATER OF U.S. DOLLAR/DEUTSCHE MARK--U.S. DOLLAR/JAPANESE YEN
PUT CURRENCY WARRANTS, EXPIRING MAY 15, 1997
-----------------------------
On May 23, 1995, Merrill Lynch & Co., Inc. (the "Company") issued
1,250,000 Greater of U.S. Dollar/Deutsche Mark--U.S. Dollar/Japanese Yen Put
Currency Warrant (the "Warrants"). Each Warrant will entitle the beneficial
owner thereof to receive from the Company the cash value, if positive (the "Cash
Settlement Value"), on the Expiration Date (as defined below), or on such
earlier date as described herein, in U.S. dollars of the greater of (i) the
right to sell Deutsche Mark ("DEM") 72.2 on the Exercise Date at a price of U.S.
$50, which represents an exchange rate of DEM 1.4440 per U.S. $1.00, and (ii)
the right to sell Japanese Yen ("JPY") 4,325 on the Exercise Date at a price of
U.S. $50, which represents an exchange rate of JPY 86.50 per U.S. $1.00. The
Warrants will be automatically exercised on the earlier of the fifth New York
Business Day immediately preceding May 15, 1997 (the "Expiration Date") or the
New York Business Day immediately preceding the date of occurrence of certain
events in bankruptcy, insolvency or reorganization involving the Company or the
date of the Warrants' expiration upon delisting from, or permanent suspension
from trading on, the American Stock Exchange unless the Warrants are
simultaneously accepted for trading pursuant to the rules of another national
securities exchange (in either case, the "Exercise Date"). The Warrants are not
exercisable at the option of the Holder. See "Description of the Warrants".
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING FOREIGN EXCHANGE
RISKS AND THE RISK OF EXPIRING WORTHLESS UNLESS THE DEUTSCHE MARK OR THE
JAPANESE YEN SUFFICIENTLY DEPRECIATES AGAINST THE U.S. DOLLAR. THE WARRANTS ARE
NOT EXERCISABLE AT THE OPTION OF THE HOLDER. INVESTORS THEREFORE SHOULD BE
PREPARED TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS, AND
ARE ADVISED TO CAREFULLY CONSIDER THE INFORMATION UNDER "RISK FACTORS RELATING
TO THE WARRANTS", "DESCRIPTION OF THE WARRANTS", "DESCRIPTION OF THE WARRANTS--
AUTOMATIC EXERCISE PRIOR TO THE EXPIRATION DATE", AND "EXCHANGE RATES AND CASH
SETTLEMENT VALUES".
The Warrants are listed on the American Stock Exchange under the symbol
"DMY.WS".
-----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
-----------------------------
This Prospectus has been prepared in connection with the Warrants and is
to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Warrants.
MLPF&S may act as principal or agent in such transactions. The Warrants may be
offered on the American Stock Exchange, or off such exchange in negotiated
transactions, or otherwise. Sales will be made at prices related to prevailing
prices at the time of sale. The distribution of the Warrants will conform to
the requirements set forth in the applicable sections of Schedule E to the By-
Laws of the National Association of Securities Dealers, Inc.
-----------------------------
MERRILL LYNCH & CO.
-----------------------------
The date of this Prospectus is , 1995.
<PAGE>
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Securities made hereby nor has
the Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Warrants shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
CERTAIN IMPORTANT INFORMATION CONCERNING THE WARRANTS
A beneficial owner will receive a cash payment upon exercise only if the
Warrants have a Cash Settlement Value in excess of zero on the Exercise
Date. The spot exchange rates of the Deutsche Mark and the Japanese Yen on
the Exercise Date as compared to the U.S. dollar will determine whether the
Warrants have a positive Cash Settlement Value. The Warrants will be "in-
the-money" (i.e., their Cash Settlement Value will be greater than zero) on
the Exercise Date only if, as of such date, the Deutsche Mark or the
Japanese Yen has depreciated (i.e., it takes more DEM or JPY to purchase
one U.S. dollar) against the U.S. dollar to the extent that one U.S. dollar
is worth more than the DEM Strike Price or the JPY Strike Price. If on the
Exercise Date the DEM Strike Price is greater than or equal to the DEM Spot
Rate (i.e., the Deutsche Mark has not depreciated relative to the U.S.
dollar) and the JPY Strike Price is greater than or equal to the JPY Spot
Rate (i.e., the Japanese Yen has not depreciated relative to the U.S.
dollar), the Warrant will expire worthless and the beneficial owner will
have sustained a total loss of the purchase price of such Warrant.
Investors therefore should be prepared to sustain a total loss of the
purchase price of their Warrants.
Beneficial owners of Warrants will be subject to foreign exchange risks
which may have important economic and tax consequences to them. See
"Exchange Rates and Cash Settlement Values" and "Certain United States
Federal Income Tax Considerations Concerning the Warrants".
3
<PAGE>
References herein to "U.S. dollars", "U.S.$" or "$" are to the currency
of the United States of America. References to "Deutsche Mark" or "DEM" are
to the currency of the Federal Republic of Germany. References to "Japanese
Yen" and "JPY" are to the currency of Japan.
RISK FACTORS RELATING TO THE WARRANTS
THE WARRANTS INVOLVE A HIGH DEGREE OF RISK, INCLUDING FOREIGN EXCHANGE
RISKS AND THE RISK OF EXPIRING WORTHLESS. INVESTORS THEREFORE SHOULD BE
PREPARED TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS.
IT IS SUGGESTED THAT INVESTORS CONSIDERING PURCHASING THE WARRANTS BE
EXPERIENCED WITH RESPECT TO OPTIONS AND OPTION TRANSACTIONS AND UNDERSTAND
THE RISKS OF FOREIGN CURRENCY TRANSACTIONS AND REACH AN INVESTMENT DECISION
ONLY AFTER CAREFULLY CONSIDERING ALL THE RISK FACTORS SET FORTH IN THIS
SECTION OF THIS PROSPECTUS, THE SUITABILITY OF THE WARRANTS IN LIGHT OF
THEIR PARTICULAR CIRCUMSTANCES AND ALL THE OTHER INFORMATION SET FORTH IN
THIS PROSPECTUS.
Exercise of the Warrants. The Warrants will be automatically exercised
on the Exercise Date and are not exercisable at the option of the Holder.
Automatic Exercise of the Warrants upon Delisting. In the event that
the Warrants are delisted from, or permanently suspended from trading on,
the American Stock Exchange and the Warrants are not simultaneously
accepted for trading pursuant to the rules of another national securities
exchange, the Warrants will expire on the date such delisting or trading
suspension becomes effective and will be automatically exercised on the New
York Business Day immediately preceding the date of such early expiration.
At the time of such automatic exercise, the Warrants may be out-of-the-
money such that the Cash Settlement Value will equal zero.
Certain Factors Affecting the Value of the Warrants. The difference
between the trading value and the Cash Settlement Value will reflect a
number of factors, including a "time value" component for the Warrants. The
"time value" of the Warrants will depend upon the time remaining to
expiration, among other factors. The expiration date of the Warrants will
be accelerated should the Warrants be delisted or should their trading on
the American Stock Exchange be suspended permanently unless the Warrants
simultaneously are accepted for trading pursuant to the rules of another
national securities exchange. Any such acceleration would result in the
total loss of any otherwise remaining "time value" and could occur when the
Warrants are out-of-the-money, thus resulting in total loss of the purchase
price of the Warrants. See "Description of the Warrants--Automatic Exercise
Prior to the Expiration Date". Before selling Warrants, beneficial owners
should carefully consider the trading value of the Warrants, the value of
the Deutsche Mark and the Japanese Yen, the probable range of Cash
Settlement Values and any related transaction costs.
It is possible that the trading value of a Warrant may decline
significantly even if there is a decrease in the value of the Deutsche Mark
or the Japanese Yen as compared to the U.S. dollar.
There can be no assurance as to how the Warrants will trade in the
secondary market or whether such market will be liquid. The trading value
of a Warrant is expected to be dependent on the Warrant Strike Prices and
also upon a number of complex interrelated factors, including those listed
below. The expected theoretical effect on the trading value of a Warrant of
each of the factors listed below, assuming in each case that all other
factors are held constant, is as follows:
(1) The DEM/U.S.$ and JPY/U.S.$ exchange rates in the forward markets.
The trading value of the Warrants is expected to depend primarily on the
DEM/U.S.$ and JPY/U.S.$ exchange rates expected on the Exercise Date.
Because the Cash Settlement Value is determined using the DEM/U.S.$ and
JPY/U.S.$ exchange rates for immediate transfers (i.e., the spot rates)
on the Exercise Date, the spot rates on other days during the term of the
Warrants may not affect the trading value of the Warrants. If Warrants
are sold prior to the maturity date, the sale price may be at a discount
from the amount expected to be payable to the beneficial owner if the
then current DEM/U.S.$ and JPY/U.S.$ exchange rates at the time of such
sale were to prevail until the Exercise Date because of the possible
fluctuation of the DEM/U.S.$ and JPY/U.S.$ exchange rates between the
time of such sale and the Exercise Date. See "Exchange Rates and Cash
Settlement Values" in this Prospectus. Furthermore, the price at which a
beneficial owner will be able to sell Warrants prior to the Exercise Date
may be at a discount, which could be substantial, from the purchase
price, if, at such
4
<PAGE>
time, the DEM Strike Price and the JPY Strike Price are greater than or
equal to the DEM/U.S.$ exchange rate or the JPY/U.S.$ exchange rate,
respectively, expected on the Exercise Date.
(2) The volatility of the DEM/U.S.$ and JPY/U.S.$ exchange rates. If
the volatility of the DEM/U.S.$ or JPY/U.S.$ exchange rate increases, the
trading value of a Warrant is expected to increase. If such volatility
decreases, the trading value of a Warrant is expected to decrease.
(3) The interest rate differential between U.S. dollar and Deutsche
Mark or Japanese Yen denominated fixed income instruments. If Deutsche
Mark interest rates increase relative to U.S. dollar interest rates, the
value of the Deutsche Mark in terms of the U.S. dollar in the forward
market is expected to decrease and, as a result, the trading value of a
Warrant is expected to increase. If Japanese Yen interest rates increase
relative to U.S. dollar interest rates, the value of the Japanese Yen in
terms of the U.S. dollar in the forward market is expected to decrease
and, as a result, the trading value of a Warrant is expected to increase.
If U.S. dollar interest rates increase relative to Deutsche Mark interest
rates or Japanese Yen interest rates, the trading value of a Warrant is
expected to decrease.
(4) Correlation between DEM/U.S.$ and JPY/U.S.$ exchange rates. The
higher the correlation between changes in the two exchange rates, the
lower the expected value of a Warrant.
(5) The time remaining to the expiration date of the Warrants. As
the time remaining to the expiration date decreases, the trading value of
a Warrant is expected to decrease.
As noted above, these hypothetical scenarios are based on the assumption
that all other factors are held constant. In reality, it is unlikely that
only one factor would change in isolation, since changes in one factor
usually cause, or result from, changes in others. Some of the factors
referred to above are, in turn, influenced by the political and economic
factors discussed below.
Warrants not Standardized Options Issued by the Options Clearing
Corporation. The Warrants are not standardized foreign currency options
of the type issued by the Options Clearing Corporation (the "OCC"), a
clearing agency regulated by the Securities and Exchange Commission. For
example, unlike purchasers of OCC standardized options who have the credit
benefits of guarantees and margin and collateral deposits by OCC clearing
members to protect the OCC from a clearing member's failure, purchasers of
Warrants must look solely to the Company for performance of its obligations
to pay the Cash Settlement Value on the exercise of Warrants. In addition,
OCC standardized options provide for physical delivery of the underlying
foreign currency (rather than cash settlement in U.S. dollars), and permit
immediate determination of value upon exercise. Further, the market for the
Warrants is not expected to be generally as liquid as the market for some
OCC standardized options.
The Warrants are unsecured contractual obligations of the Company and
will rank on a parity with the Company's other unsecured contractual
obligations and with the Company's unsecured and unsubordinated debt.
However, since the Company is a holding company, the right of the Company,
and hence the right of creditors of the Company (including beneficial
owners of the Warrants), to participate in any distribution of the assets
of any subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to the Company are restricted by net capital requirements
under the Securities Exchange Act of 1934, as amended, and under rules of
certain exchanges and other regulatory bodies.
General Risk Considerations. Options and warrants provide opportunities
for investment and pose risks to investors as a result of fluctuations in
the value of the currency, security, index or other measure underlying such
options or warrants. In general, certain of the risks associated with the
Warrants are similar to those generally applicable to other options or
warrants of private corporate issuers. However, unlike options or warrants
on equities or debt securities, which are priced primarily on the basis of
the value of a single underlying security, the trading value of a Warrant
is likely to reflect expected exchange rates on the Exercise Date.
The purchaser of a Warrant may lose his entire investment. This risk
reflects the nature of a Warrant as an asset which tends to decline in
value over time and which may, depending on the relative values of the
Deutsche Mark and the Japanese Yen as compared to the U.S. dollar, become
worthless when it expires. Assuming all other factors are held constant,
the more a Warrant is out-of-the-money and the shorter its remaining term
to expiration, the greater the risk that a purchaser of the Warrant will
lose all of his investment. This means that the purchaser
5
<PAGE>
of a Warrant who does not sell it in the secondary market will lose his
entire investment in the Warrant if, at expiration, the DEM Strike Price
and the JPY Strike Price are greater than or equal to the DEM Spot Rate and
the JPY Spot Rate, respectively.
The fact that Warrants may become valueless upon expiration means that,
in order to recover and realize a return upon his investment, a purchaser
of a Warrant must generally be correct about the direction, timing and
magnitude of an anticipated exchange rate change affecting the Deutsche
Mark or the Japanese Yen in terms of the U.S. dollar. If the value of the
Deutsche Mark or the Japanese Yen in terms of the U.S. dollar does not
decline to an extent sufficient to cover an investor's cost of the Warrant
(i.e., the purchase price plus transaction costs, if any) before the
Warrant expires, the investor will lose all or a part of his investment in
the Warrant upon expiration. Beneficial owners will thus bear the foreign
exchange risks of the U.S. dollar in terms of the Deutsche Mark and the
Japanese Yen.
The American Stock Exchange recommends that Warrants be sold only to
investors with options approved accounts and that its members and member
organizations and registered employees thereof make certain suitability
determinations before recommending transactions in Warrants. It is
suggested that investors considering purchasing Warrants be experienced
with respect to options and option transactions and understand the risks of
foreign currency transactions and reach an investment decision only after
carefully considering the suitability of the Warrants in light of their
particular circumstances. Warrants are not suitable for persons solely
dependent upon a fixed income, for individual retirement plan accounts or
for accounts under the Uniform Gift to Minors Act. INVESTORS SHOULD BE
PREPARED TO SUSTAIN A TOTAL LOSS OF THE PURCHASE PRICE OF THEIR WARRANTS.
Currency Exchange Markets. The value of any currency, including the
Deutsche Mark, the Japanese Yen, and the U.S. dollar, may be affected by
complex political and economic factors. The spot exchange rates of the
Deutsche Mark and the Japanese Yen in terms of the U.S. dollar are at any
moment a result of the supply and demand for the three currencies, and
changes in the relative exchange rates result over time from the
interaction of many factors directly or indirectly affecting economic and
political conditions in the Federal Republic of Germany, Japan and the
United States, including economic and political developments in other
countries. Of particular importance are the relative rates of inflation,
interest rate levels, the balance of payments and the extent of
governmental surpluses or deficits in the Federal Republic of Germany, in
Japan and in the United States, all of which are in turn sensitive to the
monetary, fiscal and trade policies pursued by the governments of the
Federal Republic of Germany, Japan, the United States and other countries
important to international trade and finance.
Foreign exchange rates can either be fixed by sovereign governments or
float. Exchange rates of most economically developed nations, including the
Federal Republic of Germany and Japan, are permitted to fluctuate in value
relative to the U.S. dollar. Governments, however, sometimes do not allow
their currencies to float freely in response to economic forces. Sovereign
governments in fact use a variety of techniques, such as intervention by a
country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rates of their currencies. Governments may also issue a
new currency to replace an existing currency or alter the exchange rate or
relative exchange characteristics by devaluation or revaluation of a
currency. Thus, a special risk in purchasing the Warrants is that their
liquidity, trading value and Cash Settlement Value could be affected by
governmental actions which could change or interfere with theretofore
freely determined currency valuation, fluctuations in response to other
market forces and the movement of currencies across borders. There will be
no adjustment or change in the terms of the Warrants in the event that
exchange rates should become fixed, or in the event of any devaluation or
revaluation or imposition of exchange or other regulatory controls or
taxes, or in the event of other developments affecting the Deutsche Mark,
the Japanese Yen, the U.S. dollar or any other currency. In contrast, the
OCC has reserved the authority to adjust the terms of its standardized
options for certain governmental actions and to impose special exercise
settlement procedures.
The interbank market in foreign currencies is a global, around-the-clock
market. Therefore, the hours of trading for the Warrants will not conform
to the hours during which the Deutsche Mark, the Japanese Yen and U.S.
dollar are traded. To the extent that the American Stock Exchange is closed
while the markets for the Deutsche Mark and the Japanese Yen remain open,
significant price and rate movements may take place in the underlying
foreign exchange markets that will not be reflected immediately in the
price of a Warrant on such exchange. The possibility of such movements
should be taken into account in relating closing prices on the American
Stock Exchange for the Warrants to those in the underlying foreign exchange
markets.
6
<PAGE>
There is no systematic reporting of last-sale information for foreign
currencies. Reasonably current bid and offer information is available in
certain brokers' offices, in bank foreign currency trading offices, and to
others who wish to subscribe for this information, but such information
will not necessarily reflect the DEM Noon Buying Rate or the JPY Noon
Buying Rate (each as defined below) used to calculate the DEM Spot Rate and
the JPY Spot Rate. There is no regulatory requirement that those quotations
be firm or revised on a timely basis. The absence of last-sale information
and the limited availability of quotations to individual investors may make
it difficult for many investors to obtain timely, accurate data about the
state of the underlying foreign exchange markets.
DESCRIPTION OF THE WARRANTS
GENERAL
An aggregate of 1,250,000 Warrants were issued. The Warrants were issued
under a Warrant Agreement (the "Warrant Agreement"), dated as of May 23,
1995, between the Company and Citibank, N.A., as Warrant Agent (the
"Warrant Agent"). The following statements with respect to the Warrants are
summaries of the detailed provisions of the Warrant Agreement, the form of
which is filed as an exhibit to the Registration Statement relating to the
Warrants. Wherever particular provisions of the Warrant Agreement or terms
defined therein are referred to, such provisions or definitions are
incorporated by reference as a part of the statements made, and the
statements are qualified in their entirety by such reference.
A Warrant will not require, or entitle, a beneficial owner to sell or
purchase Deutsche Marks or Japanese Yen to or from the Company. The Company
will make only a U.S. dollar cash settlement, if any, upon automatic
exercise of the Warrants.
The Warrants will expire on May 15, 1997 (the "Expiration Date") or on
such earlier date as described under "Exercise of Warrants" and "Automatic
Exercise Prior to the Expiration Date". The Warrants will be automatically
exercised on the Exercise Date, as set forth under "Exercise of Warrants",
and are not exercisable at the option of the Holder. The term "New York
Business Day", as used herein, means any day other than a Saturday or a
Sunday or a day on which commercial banks in The City of New York are
required or authorized by law or executive order to be closed.
The Warrants are unsecured contractual obligations of the Company and
rank on a parity with the Company's other unsecured contractual obligations
and with the Company's unsecured and unsubordinated debt. However, since
the Company is a holding company, the right of the Company, and hence the
right of creditors of the Company (including beneficial owners of the
Warrants), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to the Company are restricted by net capital requirements
under the Securities Exchange Act of 1934, as amended, and under rules of
certain exchanges and other regulatory bodies.
EXERCISE OF WARRANTS
The Warrants are not exercisable at the option of the Holder. The
Warrants will be automatically exercised on the fifth New York Business Day
immediately preceding the Expiration Date or, if an Early Expiration Date
(as defined herein) occurs, the New York Business Day immediately preceding
the Early Expiration Date (the "Exercise Date").
The Warrant Agent will obtain the Cash Settlement Value on the Exercise
Date from the Calculation Agent and will pay the Cash Settlement Value of
the Warrants to the Securities Depository by check on the Expiration Date
and, if May 15, 1997 is not a New York Business Day, on the next succeeding
New York Business Day. If an Early Expiration Date occurs, as described
below under "Automatic Exercise Prior to the Expiration Date", the Warrant
Agent will pay the Cash Settlement Value of the Warrants to the Securities
Depository by check on the fifth New York Business Day following the Early
Expiration Date. See "Description of the Warrants--Book-Entry Procedures
and Settlement".
7
<PAGE>
CASH SETTLEMENT VALUE
The Cash Settlement Value of a Warrant will be determined on the Exercise
Date as the amount in U.S. dollars, if positive, which is the greater of:
(i) the amount computed by subtracting from U.S. $50 an amount equal
to U.S. $50 times a fraction, the numerator of which is DEM 1.4440 per
U.S. $1.00, and the denominator of which is the DEM Spot Rate on such
Exercise Date. The "DEM Spot Rate" on the Exercise Date will be
determined by Merrill Lynch International Bank, an affiliate of the
Company, or successor thereto (the "Calculation Agent") and will equal
(a) the noon buying rate per U.S. $1.00 in The City of New York on the
Exercise Date for cable transfers in Deutsche Marks as certified for
customs purposes by the Federal Reserve Bank of New York (the "DEM Noon
Buying Rate") as reported on page 1FEE of The Reuter Monitor Money Rates
Service (or such page as may replace that page), or (b) if the DEM Noon
Buying Rate does not appear on such page by 1:00 p.m. on the Exercise
Date, the DEM Noon Buying Rate on the Exercise Date as otherwise
announced by the Federal Reserve Bank of New York, or (c) if the Federal
Reserve Bank of New York has not quoted such rate by 1:30 p.m. on the
Exercise Date, the offered spot rate of Deutsche Marks per U.S. $1.00 on
such date for a transaction amount approximately equivalent to U.S. $50
times the aggregate number of Warrants issued, quoted at approximately
1:30 p.m., New York City time, by a leading bank in the foreign exchange
markets as may be selected by the Calculation Agent; and
(ii) the amount computed by subtracting from U.S. $50 an amount equal
to U.S. $50 times a fraction, the numerator of which is JPY 86.50 per
U.S. $1.00, and the denominator of which is the JPY Spot Rate on such
Exercise Date. The "JPY Spot Rate" on the Exercise Date will be
determined by the Calculation Agent and will equal (a) the noon buying
rate per U.S. $1.00 in The City of New York on the Exercise Date for
cable transfers in Japanese Yen as certified for customs purposes by the
Federal Reserve Bank of New York (the "JPY Noon Buying Rate") as reported
on page 1FEE of The Reuter Monitor Money Rates Service (or such page as
may replace that page), or (b) if the JPY Noon Buying Rate does not
appear on such page by 1:00 p.m. on the Exercise Date, the JPY Noon
Buying Rate on the Exercise Date as otherwise announced by the Federal
Reserve Bank of New York, or (c) if the Federal Reserve Bank of New York
has not quoted such rate by 1:30 p.m. on the Exercise Date, the offered
spot rate of Japanese Yen per U.S. $1.00 on such date for a transaction
amount approximately equivalent to U.S. $50 times the aggregate number of
Warrants issued, quoted at approximately 1:30 p.m., New York City time,
by a leading bank in the foreign exchange markets as may be selected by
the Calculation Agent.
The Cash Settlement Value will be rounded, if necessary, to the nearest
cent (with one-half cent being rounded upwards).
BOOK-ENTRY PROCEDURES AND SETTLEMENT
Upon issuance, all Warrants were represented by one registered global
Warrant (the "Global Warrant"). The Global Warrant was deposited with, or
on behalf of, The Depository Trust Company, as Securities Depository, and
registered in the name of the Securities Depository or a nominee thereof.
Unless and until it is exchanged in whole or in part for Warrants in
definitive form in the limited circumstances described below, the Global
Warrant may not be transferred except as a whole by the Securities
Depository to a nominee of such Securities Depository or by a nominee of
such Securities Depository to such Securities Depository or another nominee
of such Securities Depository or by such Securities Depository or any such
nominee to a successor of such Securities Depository or a nominee of such
successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provision of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold 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 Securities
Depository's participants include securities brokers and dealers, banks,
trust companies, clearing corporations, and certain other organizations,
some of whom (and/or their representatives) own the Securities Depository.
Access to the Securities Depository book-entry system is also available to
others, such as banks,
8
<PAGE>
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own securities held by
the Securities Depository only through participants.
Ownership of beneficial interests in the Warrants will be limited to
entities which have accounts with the Securities Depository ("Agent
Members") or persons that may hold interests through Agent Members. The
Securities Depository has advised the Company that upon the issuance of the
Global Warrant representing the Warrants, the Securities Depository will
credit, on its book-entry registration and transfer system, the Agent
Members' accounts with the respective aggregate amounts of the Warrants
represented by the Global Warrant. Ownership of beneficial interests in the
Global Warrant will be shown on, and the transfer of such ownership
interests will be effected only through, records maintained by the
Securities Depository (with respect to interests of Agent Members) and on
the records of Agent Members (with respect to interests of persons held
through Agent Members). The laws of some states may 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 own,
transfer or pledge beneficial interests in the Global Warrant.
So long as the Securities Depository, or its nominee, is the registered
owner of the Global Warrant, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the
Warrants represented by the Global Warrant for all purposes under the
Warrant Agreement. Except as provided below, owners of beneficial interests
in the Global Warrant will not be entitled to have the Warrants represented
by the Global Warrant registered in their names, will not receive or be
entitled to receive physical delivery of the Warrants in definitive form
and will not be considered the owners or Holders thereof under the Warrant
Agreement. Accordingly, each person owning a beneficial interest in the
Global Warrant must rely on the procedures of the Securities Depository
and, if such person is not an Agent Member, on the procedures of the Agent
Member through which such person owns its interest, to exercise any rights
of a Holder under the Warrant Agreement. 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 Warrant desires to give or take any action which a Holder is
entitled to give or take under the Warrant Agreement, the Securities
Depository would authorize the Agent Members holding the relevant
beneficial interests to give or take such action, and such Agent Members
would authorize beneficial owners owning through such Agent Members to give
or take such action or would otherwise act upon the instructions of
beneficial owners through them.
The Cash Settlement Value resulting from the exercise of Warrants
registered in the name of the Securities Depository or its nominee will be
paid by the Warrant Agent to the Securities Depository. None of the
Company, the Warrant Agent or any other agent of the Company or agent of
the Warrant Agent will have any responsibility or liability for any aspect
of the records relating to or payments made on account of beneficial
ownership interests or for supervising or reviewing any records relating to
such beneficial ownership interests. The Company expects that the
Securities Depository, upon receipt of payment of the Cash Settlement Value
in respect of the Global Warrant, will credit the accounts of the Agent
Members with payment in amounts proportionate to their respective
beneficial interests in the Global Warrant, as shown on the records of the
Securities Depository. The Company also expects that payments by Agent
Members to owners of beneficial interests in the Global Warrant will be
governed by standing customer instructions and customary practices, as is
now the case with securities held for the accounts of customers in bearer
form or registered in "street name", and will be the responsibility of such
Agent Members. It is suggested that purchasers of Warrants with accounts at
more than one brokerage firm effect transactions in the Warrants, only
through the brokerage firm or firms which hold that purchaser's Warrants.
If the Securities Depository is at any time unwilling or unable to
continue as depository and a successor Securities Depository is not
appointed by the Company within 90 days or if the Company is subject to
certain events in bankruptcy, insolvency or reorganization, the Company
will issue Warrants in definitive form in exchange for the Global Warrant.
In addition, the Company may at any time determine not to have the Warrants
represented by the Global Warrant and, in such event, will issue Warrants
in definitive form in exchange for the Global Warrant. In any such
instance, an owner of a beneficial interest in the Global Warrant will be
entitled to have a number of Warrants equivalent to such beneficial
interest registered in its name and will be entitled to physical delivery
of such Warrants in definitive form.
9
<PAGE>
LISTING OF THE WARRANTS
The Warrants are listed on the American Stock Exchange under the symbol
"DMY.WS". The American Stock Exchange expects to cease trading the Warrants
on such Exchange as of the close of business on the Expiration Date.
AUTOMATIC EXERCISE PRIOR TO THE EXPIRATION DATE
In the event that the Warrants are delisted from, or permanently
suspended from trading on, the American Stock Exchange and the Warrants are
not simultaneously accepted for trading pursuant to the rules of another
national securities exchange, the Warrants will expire on the date such
delisting or trading suspension becomes effective (an "Early Expiration
Date") and the Warrants will be automatically exercised on the New York
Business Day immediately preceding such Early Expiration Date, and the Cash
Settlement Value, if any (determined as provided under "Exercise of
Warrants"), of such automatically exercised Warrants will be paid on the
fifth New York Business Day following such Early Expiration Date.
Settlement shall otherwise occur as described under "Book-Entry Procedures
and Settlement". The Company will notify Holders as soon as practicable of
such delisting or trading suspension. The Company has agreed in the Warrant
Agreement that it will not seek delisting of the Warrants or suspension of
their trading on the American Stock Exchange.
The Warrants may also expire on the date of occurrence of certain events
in bankruptcy, insolvency or reorganization involving the Company (any such
date also being an "Early Expiration Date") and the Warrants will be
automatically exercised as of the New York Business Day immediately
preceding such Early Expiration Date. The Cash Settlement Value, if any
(determined as provided under "Cash Settlement Value"), of such
automatically exercised Warrants will be due and payable on the fifth New
York Business Day following such Early Expiration Date. Settlement will
otherwise occur as described under "Book-Entry Procedures and Settlement".
MODIFICATION
The Warrant Agreement and the terms of the Warrants may be amended by the
Company and the Warrant Agent, without the consent of the beneficial owners
of any Warrants, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective or inconsistent provision
contained therein, or in any other manner which the Company may deem
necessary or desirable and which will not materially and adversely affect
the interests of the beneficial owners of the Warrants.
The Company and the Warrant Agent also may modify or amend the Warrant
Agreement and the terms of the Warrants, with the consent of the beneficial
owners of not less than a majority in number of the then outstanding
Warrants affected, provided that no such modification or amendment that
changes the DEM Spot Rate or the JPY Spot Rate so as to adversely affect
the beneficial owner, changes the Expiration Date or otherwise materially
and adversely affects the exercise rights of the beneficial owners of the
Warrants or reduces the percentage of the number of outstanding Warrants,
the consent of whose beneficial owners is required for modification or
amendment of a Warrant Agreement or the terms of Warrants may be made
without the consent of the beneficial owners of Warrants affected thereby.
MERGER AND CONSOLIDATION
The Company may consolidate or merge with or into any other corporation,
and the Company may sell, lease or convey all or substantially all of its
assets to any corporation, provided that the corporation (if other than the
Company) formed by or resulting from any such consolidation or merger or
which shall have received such assets shall be a corporation organized and
existing under the laws of the United States of America or a state thereof
and shall assume payment of the Cash Settlement Value with respect to all
unexercised Warrants, according to their tenor, and the due and punctual
performance and observance of all of the covenants and conditions of the
Warrant Agreement and of the Global Warrant to be performed by the Company.
10
<PAGE>
EXCHANGE RATES AND CASH SETTLEMENT VALUES
As discussed under "Description of the Warrants", the spot exchange rate
of the Deutsche Mark or the Japanese Yen in terms of the U.S. dollar on the
Exercise Date will determine the Cash Settlement Value of a Warrant.
Depreciation of the Deutsche Mark or the Japanese Yen in terms of the U.S.
dollar (i.e., appreciation of the U.S. dollar in terms of the Deutsche Mark
or the Japanese Yen) will result in a greater Cash Settlement Value.
Conversely, appreciation of the Deutsche Mark and the Japanese Yen in terms
of the U.S. dollar (i.e., depreciation of the U.S. dollar in terms of the
Deutsche Mark and the Japanese Yen) will result in a lesser or zero Cash
Settlement Value of a Warrant.
Set forth below is an illustration of the Cash Settlement Values of
Warrants at exercise based on various hypothetical DEM Spot Rates and JPY
Spot Rates. THE ACTUAL CASH SETTLEMENT VALUE OF A WARRANT WILL DEPEND
ENTIRELY ON THE ACTUAL DEM SPOT RATE AND THE ACTUAL JPY SPOT RATE ON THE
EXERCISE DATE. The illustrative Cash Settlement Values in the table do not
reflect any "time value" for a Warrant, which may be reflected in trading
value, and are not necessarily indicative of potential profit or loss,
which are also affected by purchase price and transaction costs.
<TABLE>
<CAPTION>
DEM RATES JPY RATES
HYPOTHETICAL CASH SETTLEMENT HYPOTHETICAL CASH SETTLEMENT CASH
DEM SPOT RATES VALUE BASED UPON JPY SPOT RATES VALUE BASED UPON SETTLEMENT
(DEM/U.S. $1) DEM SPOT RATES (JPY/U.S. $1) JPY SPOT RATES VALUE OF A
WARRANT
- ----------------------------- ------------------- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
1.6660............. $6.51........... 99.00............ $6.31............ $6.51
1.5880............. 4.53........... 96.00............ 4.95............ 4.95
1.5160............. 2.37........... 99.00............ 1.94............ 2.37
1.440(1) or below.. 0.00........... 86.50(1) or below.. 0.00............ 0.00
</TABLE>
_______________________
/(1)/ Strike Prices.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
11
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
S&P 500 MARKET INDEX TARGET-TERM SECURITIES/SM/ DUE AUGUST 29, 1997
("MITTS/(R)/")
Merrill Lynch & Co., Inc. (the "Company") on July 30, 1992 issued
$77,500,000 aggregate principal amount (7,750,000 Units) of the Securities.
Each $10 principal amount of S&P 500 Market Index Target-Term Securities due
August 29, 1997 (the "Securities" or "MITTS") will be deemed a "Unit" for
purposes of trading and transfer at the Securities Depository described below.
Units will be transferable by the Securities Depository, as more fully described
below, in denominations of whole Units.
The Securities were offered at an original issue price of 100% of the
principal amount thereof, bear no periodic payments of interest and will mature
on August 29, 1997. At maturity, a Holder of a Security will be entitled to
receive, with respect to each Security, the principal amount thereof, plus a
contingent interest payment (the "Supplemental Redemption Amount"), if any, if
the Final Value (as defined herein) of the S&P 500 Composite Stock Price Index
(the "S&P 500 Index") exceeds 412.08 (the "Initial Value"). If the Final Value
does not exceed the Initial Value, a Holder of a Security will be repaid the
principal amount of the Security, but the Holder will not receive any
Supplemental Redemption Amount. The Securities were issued as a series of Senior
Debt Securities under the Senior Indenture described herein. The Securities are
not redeemable prior to maturity.
The Supplemental Redemption Amount, if any, payable with respect to a
Security at maturity will equal the product of (A) the principal amount of the
applicable Security, and (B) the quotient of the Final Value less the Initial
Value, divided by the Initial Value, and (C) 115%. The calculation of the Final
Value, as more fully described herein, will be based upon certain values of the
S&P 500 Index during the ten Business Days prior to the maturity date of the
Securities.
For information as to the calculation of the Supplemental Redemption
Amount, if any, which will be paid at maturity, the calculation and the
composition of the S&P 500 Index, see "Description of Securities" and "The
Standard & Poor's 500 Index" in this Prospectus. FOR OTHER INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "SPECIAL CONSIDERATIONS" IN
THIS PROSPECTUS.
Ownership of the Securities will be maintained in book-entry form by or
through the Securities Depository. Beneficial owners of the Securities will not
have the right to receive physical certificates evidencing their ownership
except under the limited circumstances described herein.
The Securities are listed on the New York Stock Exchange under the symbol
"MIT".
No periodic payments of interest will be payable with respect to the
Securities. (See "Description of the Securities-Payment at Maturity" in this
Prospectus.)
The Securities are not subject to redemption by the Company or at the
option of any Holder prior to maturity. Upon the occurrence of an Event of
Default with respect to the Securities, Holders of the Securities may accelerate
the maturity of the Securities, as described under "Description of Securities-
Events of Default and Acceleration".
The Securities were issued in denominations of whole Units.
At maturity, a Holder of a Security will be entitled to receive the
principal amount thereof ($10 for each $10 price to public) plus a Supplemental
Redemption Amount, if any, all as provided below. If the Final Value of the S&P
500 Index does not exceed the Initial Value, a Holder of a Security will be
repaid the principal amount of the Security at maturity, but will not be
entitled to receive any contingent interest (i.e., Supplemental Redemption
Amount).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus has been prepared in connection with the Securities and is
to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Securities.
MLPF&S may act as principal or agent in such transactions. The Securities may
be offered on a national securities exchange in the event the particular issue
of Securities has been listed on such exchange, or off such exchange in
negotiated transactions, or otherwise. Sales will be made at prices related to
prevailing prices at the time of sale. The distribution of the Securities will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
-----------------------------
MERRILL LYNCH & CO.
-----------------------------
THE DATE OF THIS PROSPECTUS IS , 1995.
/(R)/"MITTS" is a registered service mark and /SM/"Market Index Target-Term
Securities" is a service mark of Merrill Lynch & Co., Inc.
<PAGE>
STANDARD & POOR'S CORPORATION ("S&P") DOES NOT GUARANTEE THE ACCURACY
AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
THE COMPANY, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, HOLDERS OF
THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED
UNDER THE LICENSE AGREEMENT DESCRIBED HEREIN OR FOR ANY OTHER USE. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR
ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Securities made hereby nor has
the Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30,1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Securities shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
2
<PAGE>
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
3
<PAGE>
SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
If the Final Value is equal to or less than the Initial Value, the
Holders of the Securities will be entitled to receive $10 in respect of
each $10 principal amount of Securities, and no Supplemental Redemption
Amount. This will be true even though the value of the S&P 500 Index as of
some interim period or periods prior to the maturity date of the Securities
may have exceeded the Initial Value because the Supplemental Redemption
Amount on the Securities is calculated on the basis of the Final Value
only.
The $10 minimum to be received by Holders at maturity in respect of
each $10 principal amount of a Security does not reflect any opportunity
cost implied by inflation and other factors relating to the time value of
money.
The S&P 500 Index does not reflect the payment of dividends on the
stocks underlying it and therefore the yield based on the S&P 500 Index to
the maturity of the Securities will not produce the same yield as if such
underlying stocks were purchased and held for a similar period.
TRADING
The Securities are listed on the New York Stock Exchange under the
symbol "MIT". It is expected that the secondary market for the Securities
will be affected by the creditworthiness of the Company and by a number of
other factors.
The trading value of the Securities is expected to depend primarily on
the extent of the appreciation, if any, of the S&P 500 Index over the
Initial Value. If, however, Securities are sold prior to the maturity date
at a time when the S&P 500 Index exceeds the Initial Value, the sale price
may be at a discount from the amount expected to be payable to the Holder
if such excess of the S&P 500 Index over the Initial Value were to prevail
until maturity of the Securities because of the possible fluctuation of the
S&P 500 Index between the time of such sale and the maturity date. (See
"The Standard & Poor's 500 Index-Historical Data on the S&P 500 Index.")
Furthermore, the price at which a Holder will be able to sell Securities
prior to maturity may be at a discount, which could be substantial, from
the principal amount thereof, if, at such time, the S&P 500 Index is below,
equal to or not sufficiently above the Initial Value. A discount could also
result from rising interest rates.
The trading values of the Securities may be affected by a number of
interrelated factors, including the creditworthiness of the Company and
those factors listed below. The relationship among these factors is
complex, including how these factors affect the relative value of the
principal amount of the Securities to be repaid at maturity and the value
of the Supplemental Redemption Amount. Accordingly, investors should be
aware that factors other than the level of the S&P 500 Index are likely to
affect their trading value. The expected effect on the trading value of the
Securities of each of the factors listed below, assuming in each case that
all other factors are held constant, is as follows:
Interest Rates. In general, if U.S. interest rates increase, the
value of the Securities is expected to decrease. If U.S. interest
rates decrease, the value of the Securities is expected to increase.
Interest rates may also affect the U.S. economy, and, in turn, the
value of the S&P 500 Index. Rising interest rates may lower the value
of the S&P 500 Index and, thus, the Securities. Falling interest rates
may increase the value of the S&P 500 Index and, thus, may increase
the value of the Securities.
Volatility of the S&P 500 Index. If the volatility of the S&P 500
Index increases, the trading value of the Securities is expected to
increase. If the volatility of the S&P 500 Index decreases, the
trading value of the Securities is expected to decrease.
4
<PAGE>
Time Remaining to Maturity. The Securities may trade at a value
above that which may be inferred from the level of interest rates and
the S&P 500 Index. This difference will reflect a "time premium" due
to expectations concerning the value of the S&P 500 Index during the
period prior to maturity of the Securities. As the time remaining to
maturity of the Securities decreases, however, this time premium is
expected to decrease, thus decreasing the trading value of the
Securities.
Dividend Rates in the United States. If dividend rates on the
stocks comprising the S&P 500 Index increase, the value of the
Securities is expected to decrease. Conversely, if dividend rates on
the stocks comprising the S&P 500 Index decrease, the value of the
Securities is expected to increase. However, in general, rising U.S.
corporate dividend rates may increase the S&P 500 Index and, in turn,
increase the value of the Securities. Conversely, falling U.S.
dividend rates may decrease the S&P 500 Index and, in turn, decrease
the value of the Securities.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully
considering the suitability of the Securities in the light of their
particular circumstances.
Investors should also consider the tax consequences of investing in
the Securities and should consult their tax advisors.
DESCRIPTION OF SECURITIES
GENERAL
The Securities were issued as a series of Senior Debt Securities under
the Senior Indenture, dated as of April 1, 1983, as amended and restated,
which is more fully described in this Prospectus. The Securities will
mature on August 29, 1997.
No periodic payments of interest will be payable with respect to the
Securities. (See "Payment at Maturity", below.)
The Securities are not subject to redemption by the Company or at the
option of any Holder prior to maturity. Upon the occurrence of an Event of
Default with respect to the Securities, Holders of the Securities may
accelerate the maturity of the Securities, as described under "Description
of Securities-Events of Default and Acceleration" and "Other Terms-Events
of Default" in this Prospectus.
The Securities were issued in denominations of whole Units.
PAYMENT AT MATURITY
At maturity, a Holder of a Security will be entitled to receive the
principal amount thereof ($10 for each $10 price to public) plus a
Supplemental Redemption Amount, if any, all as provided below. If the Final
Value of the S&P 500 Index does not exceed the Initial Value, a Holder of a
Security will be repaid the principal amount of the Security at maturity,
but will not be entitled to receive any contingent interest (i.e.,
Supplemental Redemption Amount).
5
<PAGE>
At maturity, a Holder of a Security will be entitled to receive, with
respect to each such Security, (i) the principal amount thereof, and (ii)
the Supplemental Redemption Amount, if any, equal in amount to:
(Final Value - Initial Value)
Principal X (---------------------------) X 115%
( Initial Value )
provided, however, that the Supplemental Redemption Amount will not be less
than zero. The Initial Value of the S&P 500 Index is 412.08. If the Final
Value does not exceed the Initial Value, the Supplemental Redemption Amount
will equal zero and a Holder of a Security will receive only the principal
amount thereof ($10 for each $10 price to public).
The Final Value of the S&P 500 Index will be determined by State
Street Bank and Trust Company (the "Calculation Agent") and will equal the
average (mean) of the closing values of the S&P 500 Index as calculated by
S&P on the tenth Business Day (as defined below) prior to the maturity date
(provided that a Market Disruption Event, as defined below, shall not have
occurred on such day) and on each succeeding Business Day (provided that a
Market Disruption Event shall not have occurred on the applicable day) up
to and including the fourth Business Day prior to the maturity date (each,
a "Calculation Day") until the Calculation Agent has so determined such
closing values for five Business Days. If a Market Disruption Event occurs
on one or more of the Business Days during the period specified above, the
Final Value will equal the average of the values on Business Days on which
a Market Disruption Event did not occur or, if there is only one such
Business Day, the value on such day. If Market Disruption Events occur on
all of such Business Days during such period, the Final Value shall equal
the closing value of the S&P 500 Index on the fourth Business Day prior to
the maturity date regardless of whether a Market Disruption Event shall
have occurred on such day. For purposes of determining the Final Value, a
"Business Day" is a day on which The New York Stock Exchange is open for
trading. All determinations made by the Calculation Agent shall be at the
sole discretion of the Calculation Agent and, in the absence of manifest
error, shall be conclusive for all purposes and binding on the Company and
Holders of the Securities.
If S&P discontinues publication of the S&P 500 Index and S&P or
another entity publishes a successor or substitute index that the
Calculation Agent determines, in its sole discretion, to be comparable to
the S&P 500 Index (any such index being referred to hereinafter as a
"Successor Index"), then, upon the Calculation Agent's notification of such
determination to the Trustee and the Company, the Calculation Agent will
substitute the Successor Index as calculated by S&P or such other entity
for the S&P 500 Index and calculate the Final Value as described in the
preceding paragraph. Upon any selection by the Calculation Agent of a
Successor Index, the Company shall cause notice thereof to be published in
the Wall Street Journal (or another newspaper of general circulation)
within three Business Days of such selection.
If S&P discontinues publication of the S&P 500 Index and a Successor
Index is not selected by the Calculation Agent or is no longer published on
any of the Calculation Days, the value to be substituted for the S&P 500
Index for any such Calculation Day used to calculate the Supplemental
Redemption Amount, if any, at maturity will be calculated as described
below under "Discontinuance of the S&P 500 Index."
If a Successor Index is selected or the Calculation Agent calculates a
value as a substitute for the S&P 500 Index as described below, such
Successor Index or value shall be substituted for the S&P 500 Index for all
purposes, including for purposes of determining whether a Market Disruption
Event exists.
If at any time the method of calculating the S&P 500 Index, or the
value thereof, is changed in a material respect, or if the S&P 500 Index is
in any other way modified so that such Index does not, in the opinion of
the Calculation Agent, fairly represent the value of the S&P 500 Index had
such changes or modifications not been made, then, from and after such
time, the Calculation Agent shall, at the close of business in New York,
New York, on each date that the closing value with respect to the Final
Value is to be calculated, make such adjustments as, in the good faith
judgment of the Calculation Agent, may be necessary in order to arrive at a
calculation of a
6
<PAGE>
value of a stock index comparable to the S&P 500 Index as if such changes
or modifications had not been made, and calculate such closing value with
reference to the S&P 500 Index, as adjusted. Accordingly, if the method of
calculating the S&P 500 Index is modified so that the value of such Index
is a fraction or a multiple of what it would have been if it had not been
modified (e.g., due to a split in the Index), then the Calculation Agent
shall adjust such Index in order to arrive at a value of the S&P 500 Index
as if it had not been modified (e.g., as if such split had not occurred).
"Market Disruption Event" means either of the following events, as
determined by the Calculation Agent:
(i) the suspension or material limitation (limitations pursuant
to New York Stock Exchange Rule 80A (or any applicable rule or
regulation enacted or promulgated by the New York Stock Exchange, any
other self-regulatory organization or the Securities and Exchange
Commission of similar scope as determined by the Calculation Agent) on
trading during significant market fluctuations shall be considered
"material" for purposes of this definition), in each case, for more
than two hours of trading in 100 or more of the securities included in
the S&P 500 Index, or
(ii) the suspension or material limitation, in each case, for
more than two hours of trading (whether by reason of movements in
price otherwise exceeding levels permitted by the relevant exchange or
otherwise) in (A) futures contracts related to the S&P 500 Index which
are traded on the Chicago Mercantile Exchange or (B) option contracts
related to the S&P 500 Index which are traded on the Chicago Board
Options Exchange, Inc.
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
The following table illustrates, for a range of hypothetical Final
Values, the percentage change in the S&P 500 Index from the date of
delivery of the Securities offered hereby until maturity, the Supplemental
Redemption Amount at maturity for each $10 principal amount of Securities,
and the pretax annualized rate of return to Holders of Securities and the
pretax annualized rate of return of an investment in the stocks underlying
the S&P 500 (which includes an aggregate dividend yield of 3% per annum as
more fully described below).
7
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL
REDEMPTION AMOUNT PRETAX ANNUALIZED
HYPOTHETICAL FINAL PERCENTAGE CHANGE PER $10 PRINCIPAL MITTS PRETAX RATE OF RETURN OF
VALUE OF THE S&P IN THE S&P 500 AMOUNT OF ANNUALIZED RATE OF STOCKS UNDERLYING
500 INDEX INDEX SECURITIES RETURN/(1)/ S&P 500/(2)/
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
200 -50% $ 0.00 0.00% -10.30%
240 -40% 0.00 0.00% -6.92%
280 -30% 0.00 0.00% -4.00%
320 -20% 0.00 0.00% -1.43%
360 -10% 0.00 0.00% 0.88%
400/(3)/ 0% 0.00 0.00% 2.97%
440 10% 1.15 2.15% 4.88%
480 20% 2.30 4.12% 6.65%
520 30% 3.45 5.92% 8.29%
560 40% 4.60 7.59% 9.82%
600 50% 5.75 9.14% 11.27%
640 60% 6.90 10.60% 12.63%
680 70% 8.05 11.97% 13.92%
720 80% 9.20 13.26% 15.14%
760 90% 10.35 14.49% 16.31%
800 100% 11.50 15.65% 17.42%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes (i) an investment of a fixed amount in the
stocks underlying the S&P 500 Index with the allocation of such amount
reflecting the relative weights of such stocks in the S&P 500 Index;
(ii) a percentage change in the aggregate price of such stocks that
reflects the percentage change in the S&P 500 Index; (iii) a constant
dividend yield of 3% per annum, paid quarterly from the date of
initial delivery of Securities, applied to the value of the S&P 500
Index at the end of each such quarter assuming such value increases or
decreases linearly from 400 to the applicable hypothetical Final
Value; and (iv) no transaction fees or expenses.
(3) This value is the assumed Initial Value for purposes of calculating
the above table. The actual Initial Value is 412.08.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the pretax
annualized rate of return resulting therefrom will depend entirely on the
Initial Value, and on the actual Final Value determined by the Calculation
Agent as provided herein.
The laws of New York and Delaware, the state of the Company's principal
executive offices and the state of incorporation of the Company,
respectively, do not permit the Company to raise a defense of usury. Under
present New York law the maximum rate of interest is 25% per annum on a
simple interest basis. This limit may not apply to Securities in which
$2,500,000 or more has been invested. The Company has covenanted for the
benefit of the Holders of the Securities, to the extent permitted by
applicable law, not to claim voluntarily the benefits of any laws
concerning usurious rates of interest against a Holder of the Securities.
8
<PAGE>
DISCONTINUANCE OF THE S&P 500 INDEX AND SUCCESSOR INDEX
If S&P discontinues publication of the S&P 500 Index and a Successor
Index is available, then the amount payable at maturity or upon earlier
acceleration will be determined by reference to the Successor Index, as
provided above.
If the publication of the S&P 500 Index is discontinued and S&P or
another entity does not publish a Successor Index on any of the Calculation
Days, the value to be substituted for the S&P 500 Index for any such
Calculation Day used to calculate the Supplemental Redemption Amount, if
any, at maturity will be the value computed by the Calculation Agent for
each such Calculation Day in accordance with the following procedures:
(1) identifying the component stocks of the S&P 500 Index or any
Successor Index as of the last date on which either of such indices was
calculated by S&P or another entity and published by S&P or such other
entity (each such component stock is a "Last Component Stock");
(2) for each Last Component Stock, calculating as of each such
Business Day the product of the market price per share and the number
of the then outstanding shares (such product referred to as the "Market
Value" of such stock), by reference to (a) the closing market price per
share of such Last Component Stock as quoted by the New York Stock
Exchange or the American Stock Exchange or any other registered
national securities exchange that is the primary market for such Last
Component Stock, or if no such quotation is available, then the closing
market price as quoted by any other registered national securities
exchange or the National Association of Securities Dealers Automated
Quotation National Market System ("NASDAQ"), or if no such price is
quoted, then the market price from the best available source as
determined by the Calculation Agent (collectively, the "Exchanges") and
(b) the most recent publicly available statement of the number of
outstanding shares of such Last Component Stock;
(3) aggregating the Market Values obtained in clause (2) for all
Last Component Stocks;
(4) ascertaining the Base Value (as defined below under "The
Standard & Poor's 500 Index-Computation of the Index") in effect as of
the last day on which either the S&P 500 Index or any Successor Index
was published by S&P or another entity, adjusted as described below;
(5) dividing the aggregate Market Value of all Last Component
Stocks by the Base Value (adjusted as aforesaid);
(6) multiplying the resulting quotient (expressed in decimals) by
ten.
If any Last Component Stock is no longer publicly traded on any
registered national securities exchange or in the over-the-counter market,
the last available market price per share for such Last Component Stock as
quoted by any registered national securities exchange or in the over-the-
counter market, and the number of outstanding shares thereof at such time,
will be used in computing the last available Market Value of such Last
Component Stock. Such Market Value will be used in all computations of the
S&P 500 Index thereafter.
If a company that has issued a Last Component Stock and another company
that has issued a Last Component Stock are consolidated to form a new
company, the common stock of such new company will be considered a Last
Component Stock and the common stocks of the constituent companies will no
longer be considered Last Component Stocks. If any company that has issued
a Last Component Stock merges with, or acquires, a company that has not
issued a Last Component Stock, the common stock of the surviving
corporation will, upon the effectiveness of such merger or acquisition, be
considered a Last Component Stock. In each such case, the Base Value will
be adjusted so that the Base Value immediately after such consolidation,
merger or acquisition will equal (a) the Base Value immediately prior to
such event, multiplied by (b) the quotient of the aggregate Market Value of
all Last Component
9
<PAGE>
Stocks immediately after such event, divided by the aggregate Market Value
for all Last Component Stocks immediately prior to such event.
If a company that has issued a Last Component Stock issues a stock
dividend, declares a stock split or issues new shares pursuant to the
acquisition of another company, then, in each case, the Base Value will be
adjusted (in accordance with the formula described below) so that the Base
Value immediately after the time the particular Last Component Stock
commences trading ex-dividend, the effectiveness of the stock split or the
time new shares of such Last Component Stock commence trading equals (a)
the Base Value immediately prior to such event, multiplied by (b) the
quotient of the aggregate Market Value for all Last Component Stocks
immediately after such event, divided by the aggregate Market Value of all
Last Component Stocks immediately prior to such event. The Base Value used
by the Calculation Agent to calculate the value described above will not
necessarily be adjusted in all cases in which S&P, in its discretion, might
adjust the Base Value (as described below under "The Standard & Poor's 500
Index-Computation of the S&P 500 Index").
If S&P discontinues publication of the S&P 500 Index prior to the
period during which the Supplemental Redemption Amount is to be determined
and the Calculation Agent determines that no Successor Index is available
at such time, then on each Business Day until the earlier to occur of (i)
the determination of the Final Value and (ii) a determination by the
Calculation Agent that a Successor Index is available, the Calculation
Agent shall determine the value that would be used in computing the
Supplemental Redemption Amount by reference to the method set forth in
clauses (1) through (6) above as if such day were a Calculation Day. The
Calculation Agent will cause notice of each such value to be published not
less often than once each month in the Wall Street Journal (or another
newspaper of general circulation), and arrange for information with respect
to such values to be made available by telephone. Notwithstanding these
alternative arrangements, discontinuance of the publication of the S&P 500
Index may adversely affect trading in the Securities.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a Holder of a Security
upon any acceleration permitted by the Securities, with respect to each $10
principal amount thereof, will be equal to: (i) the initial issue price
($10), plus (ii) an additional amount, if any, of contingent interest
calculated as though the date of early repayment were the maturity date of
the Securities. See "Description of Securities-Payment at Maturity" in this
Prospectus. If a bankruptcy proceeding is commenced in respect of the
Company, the claim of the Holder of a Security may be limited, under
Section 502(b)(2) of Title 11 of the United States Code, to the principal
amount of the Security plus an additional amount, if any, of contingent
interest calculated as though the date of the commencement of the
proceeding were the maturity date of the Securities.
In case of default in payment at the maturity date of the Securities
(whether at their stated maturity or upon acceleration), from and after the
maturity date the Securities shall bear interest, payable upon demand of
the Holders thereof, at the rate of 7% per annum (to the extent that
payment of such interest shall be legally enforceable) on the unpaid amount
due and payable on such date in accordance with the terms of the Securities
to the date payment of such amount has been made or duly provided for.
SECURITIES DEPOSITORY
Upon issuance, all Securities will be represented by one or more fully
registered global securities (the "Global Securities"). Each such Global
Security will be deposited with, or on behalf of, The Depository Trust
Company, as Securities Depository, registered in the name of the Securities
Depository or a nominee thereof. Unless and until it is exchanged in whole
or in part for Securities in definitive form, no Global Security may be
transferred except as a whole by the Securities Depository to a nominee of
such Securities Depository or by a nominee of such Securities Depository to
such Securities Depository or another nominee of such Securities Depository
or by such Securities Depository or any such nominee to a successor of such
Securities Depository or a nominee of such successor.
10
<PAGE>
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold securities of its
participants ("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 Securities Depository's Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations.
The Securities Depository is owned by a number of Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the
Securities Depository book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Purchases of Securities must be made by or through Participants, which
will receive a credit on the records of the Securities Depository. The
ownership interest of each actual purchaser of each Security ("Beneficial
Owner") is in turn to be recorded on the Participants' or Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from the Securities Depository of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Participant or Indirect Participant through which the
Beneficial Owner entered into the transaction. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained
by the Securities Depository (with respect to interests of Participants)
and on the records of Participants (with respect to interests of persons
held through Participants). The laws of some states may 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
own, transfer or pledge beneficial interests in Global Securities.
So long as the Securities Depository, or its nominee, is the registered
owner of a Global Security, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the
Securities represented by such Global Security for all purposes under the
Senior Indenture. Except as provided below, Beneficial Owners in a Global
Security will not be entitled to have the Securities represented by such
Global Securities registered in their names, will not receive or be
entitled to receive physical delivery of the Securities in definitive form
and will not be considered the owners or Holders thereof under the Senior
Indenture. Accordingly, each Person owning a beneficial interest in a
Global Security must rely on the procedures of the Securities Depository
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 Senior 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 Security desires to give or take any action which a Holder is
entitled to give or take under the Senior Indenture, the Securities
Depository 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. Conveyance of notices and other communications by the Securities
Depository to Participants, by Participants to Indirect Participants, and
by Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Payment of the principal of, and any Supplemental Redemption Amount
with respect to, Securities registered in the name of the Securities
Depository or its nominee will be made to the Securities Depository or its
nominee, as the case may be, as the Holder of the Global Securities
representing such Securities. None of the Company, the Trustee or any other
agent of the Company or agent of the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests or for supervising or reviewing
any records relating to such beneficial ownership interests. The Company
expects that the Securities
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Depository, upon receipt of any payment of principal or any Supplemental
Redemption Amount in respect of a Global Security, will credit the accounts
of the Participants with payment in amounts proportionate to their
respective holdings in principal amount of beneficial interest in such
Global Security as shown on the records of the Securities Depository. The
Company also expects that payments by Participants to Beneficial Owners
will be governed by standing customer instructions and customary practices,
as is now the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility
of such Participants.
If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not
appointed by the Company within 60 days, (y) the Company executes and
delivers to the Trustee a Company Order to the effect that the Global
Securities shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to the Securities, the Global Securities
will be exchangeable for Securities in definitive form of like tenor and of
an equal aggregate principal amount, in denominations of $10 and integral
multiples thereof. Such definitive Securities shall be registered in such
name or names as the Securities Depository shall instruct the Trustee. It
is expected that such instructions may be based upon directions received by
the Securities Depository from Participants with respect to ownership of
beneficial interests in such Global Securities.
THE STANDARD & POOR'S 500 INDEX
All disclosure contained in this Prospectus regarding the S&P 500
Index, including, without limitation, its make-up, method of calculation
and changes in its components, is derived from publicly available
information prepared by S&P. Neither the Company nor the Underwriter takes
any responsibility for the accuracy or completeness of such information.
GENERAL
The S&P 500 Index is published by S&P and is intended to provide an
indication of the pattern of common stock price movement. The calculation
of the value of the S&P 500 Index (discussed below in further detail) is
based on the relative value of the aggregate Market Value (as defined
above) of the common stocks of 500 companies as of a particular time as
compared to the aggregate average Market Value of the common stocks of 500
similar companies during the base period of the years 1941 through 1943. As
of May 29, 1992, the 500 companies included in the S&P 500 Index
represented approximately 76% of the aggregate Market Value of common
stocks traded on The New York Stock Exchange; however, the 500 companies
are not the 500 largest companies listed on The New York Stock Exchange and
not all 500 companies are listed on such exchange. As of May 29, 1992, the
aggregate market value of the 500 companies included in the S&P 500 Index
represented approximately 70% of the aggregate market value of United
States domestic, public companies. S&P chooses companies for inclusion in
the S&P 500 Index with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in
the common stock population of The New York Stock Exchange, which S&P uses
as an assumed model for the composition of the total market. Relevant
criteria employed by S&P include the viability of the particular company,
the extent to which that company represents the industry group to which it
is assigned, the extent to which the market price of that company's common
stock is generally responsive to changes in the affairs of the respective
industry and the Market Value and trading activity of the common stock of
that company.
12
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COMPUTATION OF THE S&P 500 INDEX
S&P currently computes the S&P 500 Index as of a particular time as
follows:
(1) the Market Value of each component stock is determined as of such
time;
(2) the Market Value of all component stocks as of such
time (as determined under clause (1) above) are aggregated;
(3) the mean average of the Market Values as of each week
in the base period of the years 1941 through 1943 of the common
stock of each company in a group of 500 substantially similar
companies is determined;
(4) the mean average Market Values of all such common stocks over
such base period (as determined under clause (3) above) are
aggregated (such aggregate amount being referred to as the "Base
Value");
(5) the aggregate Market Value of all component stocks as
of such time (as determined under clause (2) above) is divided by
the Base Value; and
(6) the resulting quotient (expressed in decimals) is
multiplied by ten.
While S&P currently employs the above methodology to calculate the S&P 500
Index, no assurance can be given that S&P will not modify or change such
methodology in a manner that may affect the Supplemental Redemption Amount,
if any, payable to Holders of Securities upon maturity or otherwise.
S&P adjusts the foregoing formula to negate the effect of changes in the
Market Value of a component stock that are determined by S&P to be
arbitrary or not due to true market fluctuations. Such changes may result
from such causes as the issuance of stock dividends, the granting to
shareholders of rights to purchase additional shares of such stock, the
purchase thereof by employees pursuant to employee benefit plans, certain
consolidations and acquisitions, the granting to shareholders of rights to
purchase other securities of the company, the substitution by S&P of
particular component stocks in the S&P 500 Index, and other reasons. In all
such cases, S&P first recalculates the aggregate Market Value of all
component stocks (after taking account of the new market price per share of
the particular component stock or the new number of outstanding shares
thereof or both, as the case may be) and then determines the New Base Value
in accordance with the following formula:
Old Base Value x New Market Value = New Base Value
----------------
Old Market Value
The result is that the Base Value is adjusted in proportion to any change
in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of
such causes upon the S&P 500 Index.
LICENSE AGREEMENT
S&P and Merrill Lynch Capital Services, Inc. have entered into a non-
exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
owned and published by S&P in connection with certain securities, including
the Securities, and the Company is an authorized sublicensee thereof.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this
Prospectus:
"The Securities are not sponsored, endorsed, sold or promoted by S&P.
S&P makes no representation or warranty, express or implied, to the
Holders of the Securities or any member of the public regarding the
13
<PAGE>
advisability of investing in securities generally or in the Securities
particularly or the ability of the S&P 500 Index to track general stock
market performance. S&P's only relationship to Merrill Lynch Capital
Services, Inc. and the Company (other then transactions entered into in
the ordinary course of business) is the licensing of certain service
marks and trade names of S&P and of the S&P 500 Index which is
determined, composed and calculated by S&P without regard to the Company
or the Securities. S&P has no obligation to take the needs of the Company
or the Holders of the Securities into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for
and has not participated in the determination of the timing of the sale
of the Securities, prices at which the Securities are to initially be
sold, or quantities of the Securities to be issued or in the
determination or calculation of the equation by which the Securities are
to be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the
Securities."
A potential investor should review the historical performance of the
Index. The historical performance of the Index should not be taken as an
indication of future performance, and no assurance can be given that the
Index will increase sufficiently to cause the beneficial owners of the
Securities to receive an amount in excess of the principal amount at the
maturity of the Securities.
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities may
from time to time be issued thereunder, without limitation as to aggregate
principal amount, in one or more series and upon such terms as the Company
may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically
14
<PAGE>
permitted by the Senior Indenture) on the Voting Stock owned directly or
indirectly by the Company of any Subsidiary (other than a Subsidiary which,
at the time of the incurrence of such secured indebtedness, has a net worth
of less than $3,000,000) without making effective provision whereby the
Outstanding Senior Debt Securities will be secured equally and ratably with
such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all
or substantially all of its assets to any corporation, provided that (i)
the corporation (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received such assets shall
be a corporation organized and existing under the laws of the United States
of America or a state thereof and shall assume payment of the principal of
(and premium, if any) and interest on the Senior Debt Securities and the
performance and observance of all of the covenants and conditions of the
Senior Indenture to be performed or observed by the Company, and (ii) the
Company or such successor corporation, as the case may be, shall not
immediately thereafter be in default under the Senior Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose Holders is required to modify or amend the Indenture;
or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Senior Debt Securities necessary to waive any past default to
less than a majority. No modification or amendment of the Subordinated
Indenture or any Subsequent Indenture for Subordinated Debt Securities may
adversely affect the rights of any holder of Senior Indebtedness without
the consent of such Holder. Except with respect to certain fundamental
provisions, the Holders of at least a majority in principal amount of
Outstanding Senior Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default with
respect to Senior Debt Securities of any series: (a) default in the payment
of any interest or Additional Amounts payable on any Senior Debt Security
of that series when due, continued for 30 days; (b) default in the payment
of any principal or premium, if any, on
15
<PAGE>
any Senior Debt Security of that series when due; (c) default in the
deposit of any sinking fund payment, when due, in respect of any Senior
Debt Security of that series; (d) default in the performance of any other
covenant of the Company contained in the Indenture for the benefit of such
series or in the Senior Debt Securities of such series, continued for 60
days after written notice as provided in the Senior Indenture; (e) certain
events in bankruptcy, insolvency or reorganization; and (f) any other Event
of Default provided with respect to Senior Debt Securities of that series.
The Trustee or the Holders of 25% in principal amount of the Outstanding
Senior Debt Securities of that series may declare the principal amount (or
such lesser amount as may be provided for in the Senior Debt Securities of
that series) of all Outstanding Senior Debt Securities of that series and
the interest due thereon and Additional Amounts payable in respect thereof,
if any to be due and payable immediately if an Event of Default with
respect to Senior Debt Securities of such series shall occur and be
continuing at the time of such declaration. At any time after a
declaration of acceleration has been made with respect to Senior Debt
Securities of any series but before a judgment or decree for payment of
money due has been obtained by the Trustee, the Holders of a majority in
principal amount of the Outstanding Senior Debt Securities of that series
may rescind any declaration of acceleration and its consequences, if all
payments due (other than those due as a result of acceleration) have been
made and all Events of Default have been remedied or waived. Any Event of
Default with respect to Senior Debt Securities of any series may be waived
by the Holders of a majority in principal amount of all Outstanding Senior
Debt Securities of that series, except in a case of failure to pay
principal or premium, if any, or interest or Additional Amounts payable on
any Senior Debt Security of that series for which payment had not been
subsequently made or in respect of a covenant or provision which cannot be
modified or amended without the consent of the Holder of each Outstanding
Senior Debt Security of such series affected.
The Holders of a majority in principal amount of the Outstanding Senior
Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a statement as
to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on
16
<PAGE>
their reports on such information should be restricted in light of the
limited nature of the review procedures applied. Deloitte & Touche LLP
are not subject to the liability provisions of Section 11 of the Act for
any such report on unaudited interim financial information because any such
report is not a "report" or a "part" of the registration statement prepared
or certified by an accountant within the meaning of Sections 7 and 11 of
the Act.
17
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
STOCK MARKET ANNUAL RESET TERM/SM/ NOTES DUE DECEMBER 31, 1997
"SMART NOTES/SM/"
------------------
On October 29, 1992, Merrill Lynch & Co., Inc. (the "Company") issued
$28,000,000 aggregate principal amount of Stock Market Annual Reset Term Notes
due December 31, 1997 (the "SMART Notes", or the "Notes"). The Notes were
issued in denominations of $1,000 and integral multiples thereof, will mature
and be repayable at 100% of the principal amount thereof on December 31, 1997.
Cash payments will be payable with respect to the Notes semiannually on June 30
and December 31 of each year,as described below ("June Payment Dates" and
"December Payment Dates",respectively), commencing December 31, 1992.
The Company will make interest payments on the Notes for each year at a
rate per annum equal to 70% of the percent increase,if any, in the S&P 500
Composite Stock Price Index (the "S&P 500 Index") as determined in each year
from the Starting Annual Value to the Ending Annual Value, as further described
herein. In no event, however, will the annual payments on the Notes be less
than $30 per annum per $1,000 principal amount of Notes (3% per annum) (the
"Minimum Annual Payment") or more than $105 per annum per $1,000 principal
amount of Notes (10.5% per annum) (the "Maximum Annual Payment"). For each
$1,000 principal amount of Notes, the Company will pay $15 on each June Payment
Date and will pay the balance of the annual amount due on the Notes on the
December Payment Date. The Starting Annual Value is reset generally on the
first NYSE Business Day in each calendar year, and, therefore,the amount payable
on the Notes in each calendar year, subject to the Minimum and Maximum Annual
Payments, will be based on a percentage change in the S&P 500 Index occurring
during that year. The Notes are not subject to redemption by the Holders or the
Company prior to maturity.
For information as to the calculation of the amount payable in any
calendar year, the calculation of the S&P 500 Index, see "Description of Notes"
and "The Standard & Poor's 500 Index" in this Prospectus. FOR OTHER INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "SPECIAL CONSIDERATIONS"
IN THIS PROSPECTUS.
Ownership of the Notes will be maintained only in book-entry form by or
through the Securities Depository. Beneficial owners of the Notes will not
have the right to receive physical certificates evidencing their ownership
except under the limited circumstances described herein.
The Notes are listed on the New York Stock Exchange under the symbol
"MERIQ 97".
------------------
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------
This Prospectus has been prepared in connection with the Notes and is to
be used by Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), a
wholly-owned subsidiary of the Company, in connection with offers and sales
related to market-making transactions in the Notes. MLPF&S may act as principal
or agent in such transactions. Such sales will be made at prices related to
prevailing market prices at the time of sale. The distribution of the Notes
will conform to the requirements set forth in the applicable sections of
Schedule E to the By-Laws of the National Association of Securities Dealers,
Inc.
------------------
MERRILL LYNCH & CO.
------------------
THE DATE OF THIS PROSPECTUS IS , 1995.
/SM/"SMART Notes" and "Stock Market Annual Reset Term" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
STANDARD & POOR'S CORPORATION ("S&P") DOES NOT GUARANTEE THE ACCURACY
AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
THE COMPANY, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, HOLDERS OF
THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX
OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED UNDER
THE LICENSE AGREEMENT DESCRIBED HEREIN OR FOR ANY OTHER USE. S&P MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR
ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Notes made hereby nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Notes shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED
2
<PAGE>
BY REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
3
<PAGE>
SPECIAL CONSIDERATIONS
SEMIANNUAL PAYMENTS
If the Ending Annual Value applicable to a December Payment Date does
not exceed the Starting Annual Value applicable to such December Payment
Date by more than approximately 4.3%, Holders of the Notes will receive
only the Minimum Annual Payment payable with respect to the Notes, even if
the value of the S&P 500 Index at some point between the determination of
the applicable Starting Annual Value and the determination of the
applicable Ending Annual Value exceeded such Starting Annual Value by more
than 4.3%. The annual amounts payable on the Notes based on the S&P 500
Index is limited to 70% of the percentage increase in such index during any
relevant period, and in no event will such amount exceed the Maximum Annual
Payment.
Holders will receive total annual payments on the Notes equal to not
less than a per annum yield of 3% (the "Minimum Annual Payment"), and will
be repaid 100% of the principal amount of the Notes at maturity. The
payment of additional semiannual amounts are subject to the conditions
described under "Description of Notes-Semiannual Payments". A Holder of the
Notes may receive interest payments with respect to the Notes equal to only
the Minimum Annual Payment for each year, and such interest payments are
below what the Company would pay as interest as of the date hereof if the
Company issued non-callable senior debt securities with a similar maturity
as that of the Notes. The return of principal at maturity and the payment
of the Minimum Annual Payment with respect to the Notes are not expected to
reflect the full opportunity costs implied by inflation or other factors
relating to the time value of money.
The amount payable on the Notes based on the S&P 500 Index will not
produce the same return as if the underlying stocks underlying the S&P 500
Index were purchased and held for a similar period because of the
following: (i) the annual amount payable on the Notes is limited to 70% of
the percentage increase in the S&P 500 Index during any relevant period and
the annual amount payable of the Notes is subject to a Minimum Annual
Payment and a Maximum Annual Payment, (ii) the S&P 500 Index does not
reflect the payment of dividends on the stocks underlying it, and (iii) the
amount payable on the Notes does not reflect any changes in the S&P 500
Index for the period between the determination of an Ending Annual Value
(generally on the seventh NYSE Business Day prior to the end of a year) and
the determination of the next succeeding Starting Annual Value (generally
on the first NYSE Business Day in the following year).
TRADING
The Notes are listed on the New York Stock Exchange under the symbol
"MERIQ 97". It is expected that the secondary market for the Notes will be
affected by the creditworthiness of the Company and by a number of other
factors. It is possible to view the Notes as the economic equivalent of a
debt obligation plus a series of cash settlement options; however, there
can be no assurance that the Notes will not trade in the secondary market
at a discount from the aggregate value of such economic components, if such
economic components were valued and capable of being traded separately.
The trading values of the Notes may be affected by a number of
interrelated factors, including those listed below. The following is the
expected effect on the trading value of the Notes of each of the factors
listed below. The following discussion of each separate factor generally
assumes that all other factors are held constant, although the actual
interrelationship between certain of such factors is complex.
Relative Level of the S&P 500 Index. The trading value of the
Notes is expected to depend significantly on the extent of the
appreciation, if any, of the S&P 500 Index over the Annual Starting
Value applicable to the next succeeding December Payment Date. If,
however, Notes are sold at a time when the S&P 500 Index exceeds the
Annual Starting Value, the sale price may be at a discount from the
amount expected to be payable to the Holder if such excess of the S&P
500 Index over such Annual Starting Value were to prevail until the
next December Payment Date because the increase in the value of the
S&P 500
4
<PAGE>
Rights may not reflect the full appreciation of the S&P 500 Index
since the Annual Starting Value. Furthermore, the price at which a
Holder will be able to sell Notes prior to a December Payment Date may
be at a discount, which could be substantial, from the principal
amount thereof, if, at such time, the S&P 500 Index is below, equal to
or not sufficiently above the Annual Starting Value applicable to such
December Payment Date. The value of the Notes may also be affected by
the limitation of the Maximum Annual Payment.
Volatility of the S&P 500 Index. If the volatility of the S&P 500
Index increases, the trading value of the Notes is expected to
increase. If the volatility of the S&P 500 Index decreases, the
trading value of the Notes is expected to decrease.
Interest Rates. In general, if U.S. interest rates increase, the
value of the Notes is expected to decrease. If U.S. interest rates
decrease, the value of the Notes is generally expected to increase.
Interest rates may also affect the U.S. economy, and, in turn, the
level of the S&P 500 Index. Rising interest rates may lower the level
of the S&P 500 Index and, thus, the value of the Notes. Falling
interest rates may increase the level of the S&P 500 Index and, thus,
may increase the value of the Notes.
Time Remaining to December Payment Dates. The Notes may trade at
a value above that which may be inferred from the level of interest
rates and the S&P 500 Index. This difference will reflect a "time
premium" due to expectations concerning the level of the S&P 500 Index
during the period prior to each December Payment Date. As the time
remaining to each December Payment Date decreases, however, this time
premium may decrease, thus decreasing the trading value of the Notes.
Time Remaining to Maturity. As the number of remaining December
Payment Dates decreases, the cumulative value of all the S&P Rights
will decrease, thus decreasing the value of the Notes. Furthermore, as
the time to maturity decreases, the value of the fixed payments is
expected to increase, thus increasing the value of the Notes.
Dividend Rates in the United States. If dividend rates on the
stocks comprising the S&P 500 Index increase, the value of the S&P
Rights is expected to decrease. Consequently the value of the Notes is
expected to decrease. Conversely, if dividend rates on the stocks
comprising the S&P 500 Index decrease, the value of the S&P Rights is
expected to increase and, therefore, the value of the Notes is
expected to increase. However, in general rising U.S. corporate
dividend rates may increase the S&P 500 Index and, in turn, increase
the value of the Notes. Conversely, falling U.S. dividend rates may
decrease the S&P 500 Index and, in turn, decrease the value of the
Notes.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Notes should reach an investment decision only after carefully considering
the suitability of the Notes in the light of their particular
circumstances.
Investors should also consider the tax consequences of investing in
the Notes and should consult their tax advisors.
DESCRIPTION OF NOTES
GENERAL
The Notes were issued as a series of Senior Debt Securities under the
Senior Indenture, dated as of April 1, 1983, as amended and restated, which
is more fully described below. The Notes will mature, and the principal of
the Notes will be repayable at par, on December 31, 1997.
5
<PAGE>
The Notes are not subject to redemption prior to maturity by the
Company or at the option of any Holder. Upon the occurrence of an Event
of Default with respect to the Notes, however, Holders of the Notes or the
Senior Debt Trustee may accelerate the maturity of the Notes, as described
under "Description of Notes-Events of Default and Acceleration" and "Other
Terms-Events of Default" in the this Prospectus.
The Notes were issued in denominations of $1,000 and integral
multiples thereof.
SEMIANNUAL PAYMENTS
The Company will make semiannual interest payments on the Notes each
June 30 and December 31 ("June Payment Dates" and "December Payment Dates",
respectively) beginning December 31, 1992, as described below, to the
persons in whose names the Notes are registered on the next preceding June
29 or December 30, except as provided below. Notwithstanding the foregoing,
if it is known three Business Days prior to December 31 that December 31
will not be a Business Day, the amount payable by the Company with respect
to such December Payment Date will be made on the Business Day immediately
preceding such December 31 to the persons in whose names the Notes are
registered on the second Business Day immediately preceding such December
31.
For each calendar year, the Company will pay an amount equal to the
following for each $1,000 principal amount of Notes:
ENDING ANNUAL VALUE-STARTING ANNUAL VALUE
$1,000 X ( ----------------------------------------- ) X 70%
STARTING ANNUAL VALUE
provided, however, that the per annum amount payable as a result of the
foregoing will not be less than $30 per $1,000 principal amount of Notes
(3% per annum) (the "Minimum Annual Payment") or greater than $105 per
$1,000 principal amount of Notes (10.5% per annum) (the "Maximum Annual
Payment"). For each $1,000 principal amount of the Notes, the Company will
pay $15 of the total amount payable for each calendar year on the June
Payment Date, and will pay the balance of the annual amount due on the
Notes for such year on the December Payment Date. The "Starting Annual
Value" applicable to the determination of the amount payable in a calendar
year will equal the closing value of the S&P 500 Index on the first NYSE
Business Day (as defined herein) in such year on which a Market Disruption
Event has not occurred as determined by State Street Bank and Trust Company
(the "Calculation Agent"); provided, however, that if a Market Disruption
Event shall have occurred on each of the first ten NYSE Business Days in
any year, the "Starting Annual Value" applicable to the determination of
the amount payable in such year will equal the closing value of the S&P 500
Index on such tenth NYSE Business Day. The "Ending Annual Value"
applicable to the determination of the amount payable in a calendar year
will equal the closing value of the S&P 500 Index on the seventh scheduled
NYSE Business Day preceding the end of such year (including December 31 if
it is a scheduled NYSE Business Day) as determined by the Calculation
Agent, unless a Market Disruption Event has occurred on such day. In the
event that a Market Disruption Event has occurred on the seventh scheduled
NYSE Business Day preceding the end of such year, the "Ending Annual Value"
applicable to the determination of the amount payable in such year will
equal the closing value of the S&P 500 Index on the sixth scheduled NYSE
Business Day preceding the end of such year regardless of whether such day
is a NYSE Business Day or a Market Disruption Event occurs on such day. The
Calculation Agent will determine the seventh scheduled NYSE Business Day,
and, if necessary, the sixth scheduled NYSE Business Day prior to each
December Payment Date.
If the Ending Annual Value applicable to a December Payment Date does
not exceed the applicable Starting Annual Value by more than approximately
4.3%, Holders of the Notes will receive only the Minimum Annual Payment
payable with respect to the Notes, even if the value of the S&P 500 Index
at some point between the determination of the applicable Starting Annual
Value and the determination of the applicable Ending Annual Value exceeded
such Starting Annual Value by more than 4.3%. If the Ending Annual Value
applicable to a December Payment Date exceeds the applicable Starting
Annual Value by 15% or more, Holders of Notes will receive the Maximum
Amount Payable with respect to the Notes. The Holders will receive not less
than the Minimum Annual
6
<PAGE>
Payment (3% per annum) even in the event that the Ending Annual Value is
less than the Starting Annual Value in any year.
Any day on which a Starting Annual Value or an Ending Annual Value is
required to be calculated is referred to herein as a "Calculation Day". A
"NYSE Business Day" is a day on which The New York Stock Exchange is open
for trading. All determinations made by the Calculation Agent shall be at
the sole discretion of the Calculation Agent and, in the absence of
manifest error, shall be conclusive for all purposes and binding on the
Company and Holders of the Notes.
"Market Disruption Event" means either of the following events, as
determined by the Calculation Agent:
(i) the material limitation (limitations pursuant to New York Stock
Exchange Rule 80A (or any applicable rule or regulation enacted or
promulgated by the New York Stock Exchange, any other self-regulatory
organization or the Securities and Exchange Commission of similar scope
as determined by the Calculation Agent) on trading during significant
market fluctuations shall be considered "material" for purposes of this
definition) or suspension, in each case, for more than two hours of
trading in 100 or more of the securities included in the S&P 500 Index,
or
(ii) the suspension or material limitation, in each case, for more
than two hours of trading (whether by reason of movements in price
otherwise exceeding levels permitted by the relevant exchange or
otherwise) in (A) futures contracts related to the S&P 500 Index which
are traded on the Chicago Mercantile Exchange or (B) option contracts
related to the S&P 500 Index which are traded on the Chicago Board
Options Exchange, Inc.
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
If S&P discontinues publication of the S&P 500 Index and S&P or another
entity publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to the S&P 500 Index
(any such index being referred to hereinafter as a "Successor Index"),
then, upon the Calculation Agent's notification of such determination to
the Trustee and the Company, the Calculation Agent will substitute the
Successor Index as calculated by S&P or such other entity for the S&P 500
Index and calculate the Starting Annual Value and/or the Ending Annual
Value as described above. Upon any selection by the Calculation Agent of a
Successor Index, the Company shall cause notice thereof to be published in
The Wall Street Journal (or another newspaper of general circulation)
within three Business Days of such selection.
If S&P discontinues publication of the S&P 500 Index and a Successor
Index is not selected by the Calculation Agent or is no longer published on
any of the Calculation Days, the value to be substituted for the S&P 500
Index for any such Calculation Day used to calculate the Starting Annual
Value or Ending Annual Value, as the case may be, will be calculated as
described below under "Discontinuance of the S&P 500 Index."
If a Successor Index is selected or the Calculation Agent calculates a
value as a substitute for the S&P 500 Index as described below, such
Successor Index or value shall be substituted for the S&P 500 Index for all
purposes.
If at any time the method of calculating the S&P 500 Index, or the value
thereof, is changed in a material respect, or if the S&P 500 Index is in
any other way modified so that such Index does not, in the opinion of the
Calculation Agent, fairly represent the value of the S&P 500 Index had such
changes or modifications not been made, then, from and after such time, the
Calculation Agent shall, at the close of business in New York, New York, on
each Calculation Date, make such adjustments as, in the good faith judgment
of the Calculation Agent, may be necessary in order to arrive at a
calculation of a value of a stock index comparable to the S&P 500 Index
7
<PAGE>
as if such changes or modifications had not been made, and calculate such
closing value with reference to the S&P 500 Index, as adjusted.
Accordingly, if the method of calculating the S&P 500 Index is modified so
that the value of such Index is a fraction or a multiple of what it would
have been if it had not been modified (e.g., due to a split in the Index),
then the Calculation Agent shall adjust such Index in order to arrive at a
value of the S&P 500 Index as if it had not been modified (e.g., as if such
split had not occurred).
The following table sets forth the S&P Index Value for each year from
1947 through 1991 as reported by S&P on the first business day in each such
year and on the seventh business day prior to the end of each such year.
The table also sets forth (i) the percentage change in the S&P Index Value
between such values for each year, (ii) the per annum interest that would
have been paid on the Notes for each such year assuming the Notes were
outstanding during such year and such values were deemed a Starting and
Ending Annual Value, respectively, and (iii) the simple rolling average per
annum interest that would have been paid on the Notes during successive
five-year periods assuming the Notes had a maturity of five years and
matured on December 30 on the respective years indicated. The historical
experience of the S&P 500 Index should not be taken as an indication of
future performance, and no assurance can be given that the value of the S&P
500 Index, during any year in which the Notes are outstanding, will
increase sufficiently to result in a payment in excess of the Minimum
Annual Payment amount so that only the minimum 3% annual rate of return is
payable.
8
<PAGE>
HYPOTHETICAL ANNUAL SMART NOTE PAYMENTS
<TABLE>
<CAPTION>
5-YR. PRE-TAX SIMPLE
S&P 500 INDEX S&P 500 INDEX HYPOTHETICAL ROLLING AVERAGE
STARTING ANNUAL ENDING ANNUAL S&P 500 INDEX ANNUAL SMART OF HYPOTHETICAL
YEAR VALUE (1) VALUE (2) % CHANGE(1)(2) NOTE PAYMENT(3) SMART NOTE PAYMENTS
- ---------------------- -------------- -------------- ------------------- ------------------ --------------------
<S> <C> <C> <C> <C> <C>
1947............. 15.20 15.26 0.39% 3.00%
1948............. 15.34 15.15 -1.24% 3.00%
1949............. 14.95 16.64 11.30% 7.91%
1950............. 16.66 19.98 19.93% 10.50%
1951............. 20.77 23.53 13.29% 9.30% 6.74%
1952............. 23.80 26.30 10.50% 7.35% 7.61%
1953............. 26.54 24.76 -6.71% 3.00% 7.61%
1954............. 24.95 35.34 41.64% 10.50% 8.13%
1955............. 36.75 45.34 23.37% 10.50% 8.13%
1956............. 45.16 46.43 2.81% 3.00% 6.87%
1957............. 46.20 39.48 -14.55% 3.00% 6.00%
1958............. 40.33 54.07 34.07% 10.50% 7.50%
1959............. 55.44 59.14 6.67% 4.67% 6.33%
1960............. 59.91 57.55 -3.94% 3.00% 4.83%
1961............. 57.57 71.12 21.80% 10.50% 6.33%
1962............. 70.96 62.82 -11.47% 3.00% 6.33%
1963............. 62.69 74.28 18.49% 10.50% 6.33%
1964............. 75.43 84.33 11.80% 8.26% 7.05%
1965............. 84.23 92.29 9.57% 6.70% 7.79%
1966............. 92.18 81.38 -11.72% 3.00% 6.29%
1967............. 80.38 95.15 18.38% 10.50% 7.79%
1968............. 96.11 106.34 10.64% 7.45% 7.18%
1969............. 103.93 90.58 -12.85% 3.00% 6.13%
1970............. 93.00 90.04 -3.18% 3.00% 5.39%
1971............. 91.15 101.18 11.00% 7.70% 6.33%
1972............. 101.67 116.34 14.43% 10.10% 6.25%
1973............. 119.10 94.55 -20.61% 3.00% 5.36%
1974............. 97.68 66.91 -31.50% 3.00% 5.36%
1975............. 70.23 88.14 25.50% 10.50% 6.86%
1976............. 90.90 104.71 15.19% 10.50% 7.42%
1977............. 107.00 93.05 -13.04% 3.00% 6.00%
1978............. 93.82 94.68 0.92% 3.00% 6.00%
1979............. 96.73 108.26 11.92% 8.34% 7.07%
1980............. 105.76 135.78 28.39% 10.50% 7.07%
1981............. 136.34 122.88 -9.87% 3.00% 5.57%
1982............. 122.74 138.83 13.11% 9.18% 6.80%
1983............. 138.34 163.56 18.23% 10.50% 8.30%
1984............. 164.04 166.38 1.43% 3.00% 7.24%
1985............. 165.37 210.94 27.56% 10.50% 7.24%
1986............. 209.59 248.75 18.68% 10.50% 8.74%
1987............. 246.45 249.95 1.42% 3.00% 7.50%
1988............. 255.94 277.38 8.38% 5.86% 6.57%
1989............. 275.31 342.84 24.53% 10.50% 8.07%
1990............. 359.69 330.12 -8.22% 3.00% 6.57%
1991............. 326.45 387.04 18.56% 10.50% 6.57%
Averages 6.76% 6.81%
</TABLE>
NOTES:
(1) Closing S&P 500 Index value on the first business day of each calendar
year. Source: Standard and Poor's.
(2) Closing S&P 500 Index value on the seventh business day prior to the
end of each calendar year. Source: Standard and Poor's.
(3) For purposes of illustration, the above hypothetical table uses the
Minimum Annual Payment of $30 (3% per annum) and the Maximum Annual
Payment of $105 (10.5% per annum). Does not reflect gains or losses in
the market value of SMART Notes which may occur in secondary market
trading.
9
<PAGE>
The following table is an example of hypothetical annual payments on the
SMART Notes using assumed changes in the S&P 500 Index. The numbers below
are shown for illustrative purposes only and are not intended to predict
either the future levels of the S&P 500 Index or the payments to be
received on the Notes.
HYPOTHETICAL SMART NOTE PAYMENTS
<TABLE>
<CAPTION>
INDEX HYPOTHETICAL ANNUALIZED
HYPOTHETICAL STARTING HYPOTHETICAL ENDING PERCENT PERCENT SMART NOTE PAYMENT
YEAR ANNUAL VALUE(1) ANNUAL VALUE(2) CHANGE PARTICIPATION RATE
- ----------------------- -------------------------- --------------- -------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
1........ 415 423 1.9% 70% 3.00%*(3)
2........ 421 488 15.9% 70% 10.50%**
3........ 486 434 -10.7% 70% 3.00%*
4........ 440 479 8.9% 70% 6.20%
5........ 480 585 21.9% 70% 10.50%**
6........ 589 668 13.4% 70% 9.39%
</TABLE>
(1) Assumed closing value of the S&P 500 Index on the first NYSE Business
Day of each year (or the date of pricing of the Notes for the first
year the Notes are outstanding).
(2) Assumed closing value of the S&P 500 Index on the seventh scheduled
NYSE Business Day prior to the end of each year.
(3) The Index Percent Change applicable to the December 31, 1992 Payment
Date will depend upon the increase, if any, in the S&P 500 Index from
October 22, 1992 to the date of determination of the Ending Annual
Value in December 1992 and will be prorated as discussed herein by a
factor equal to 62/360. Under this convention, an annualized payment
of 3% for the first period would be prorated to result in an actual
payment of $5.17 per $1,000 principal amount of Notes.
* Minimum Annual Payment of $30 per $1,000 principal amount of Notes (3.00%
per annum).
** Maximum Annual Payment of $105 per $1,000 principal amount of Notes
(10.50% per annum).
The above information is for purposes of illustration only. The actual
amount payable in any year on the Notes will depend entirely on the
Starting Annual Value and Ending Annual Value applicable to such year
determined by the Calculation Agent as provided herein and the Minimum
Annual Payment and the Maximum Annual Payment.
A potential investor should review the historical performance of the S&P
500 Index. The historical performance of the S&P 500 Index should not be
taken as an indication of future performance, and no assurance can be given
that the S&P 500 Index will increase sufficiently during any calendar year
to cause the beneficial owners of the Notes to receive an amount in excess
of the Minimum Annual Payment during any such calendar year.
DISCONTINUANCE OF THE S&P 500 INDEX AND SUCCESSOR INDEX
If S&P discontinues publication of the S&P 500 Index and a Successor
Index is available, then the amount payable on any December Payment Date
will be determined by reference to the Successor Index, as provided above.
If the publication of the S&P 500 Index is discontinued and S&P or
another entity does not publish a Successor Index on any of the Calculation
Days, the value to be substituted for the S&P 500 Index for any such
Calculation Day will be the value computed by the Calculation Agent for
each such Calculation Day in accordance with the following procedures:
(1) identifying the component stocks of the S&P 500 Index or any
Successor Index as of the last date on which either of such indices was
calculated by S&P or another entity and published by S&P or such other
entity (each such component stock is a "Last Component Stock");
(2) for each Last Component Stock, calculating as of each such NYSE
Business Day the product of the market price per share and the number of
the then outstanding shares (such product referred to as the "Market
Value" of such stock), by reference to (a) the closing market price per
share of such Last Component Stock as quoted by the New York Stock
Exchange or the American Stock Exchange or any other registered national
securities exchange that is the primary market for such Last Component
Stock, or if no such quotation is available, then the closing market
price as quoted by any other registered national securities exchange or
the
10
<PAGE>
National Association of Securities Dealers Automated Quotation National
Market System ("NASDAQ"), or if no such price is quoted, then the market
price from the best available source as determined by the Calculation
Agent (collectively, the "Exchanges") and (b) the most recent publicly
available statement of the number of outstanding shares of such Last
Component Stock;
(3) aggregating the Market Values obtained in clause (2) for all Last
Component Stocks;
(4) ascertaining the Base Value (as defined below under "The Standard
& Poor's 500 Index-Computation of the S&P 500 Index") in effect as of the
last day on which either the S&P 500 Index or any Successor Index was
published by S&P or another entity, adjusted as described below;
(5) dividing the aggregate Market Value of all Last Component Stocks
by the Base Value (adjusted as aforesaid);
(6) multiplying the resulting quotient (expressed in decimals) by ten.
If any Last Component Stock is no longer publicly traded on any
registered national securities exchange or in the over-the-counter market,
the last available market price per share for such Last Component Stock as
quoted by any registered national securities exchange or in the over-the-
counter market, and the number of outstanding shares thereof at such time,
will be used in computing the last available Market Value of such Last
Component Stock. Such Market Value will be used in all computations of the
S&P 500 Index thereafter.
If a company that has issued a Last Component Stock and another company
that has issued a Last Component Stock are consolidated to form a new
company, the common stock of such new company will be considered a Last
Component Stock and the common stocks of the constituent companies will no
longer be considered Last Component Stocks. If any company that has issued
a Last Component Stock merges with, or acquires, a company that has not
issued a Last Component Stock, the common stock of the surviving
corporation will, upon the effectiveness of such merger or acquisition, be
considered a Last Component Stock. In each such case, the Base Value will
be adjusted so that the Base Value immediately after such consolidation,
merger or acquisition will equal (a) the Base Value immediately prior to
such event, multiplied by (b) the quotient of the aggregate Market Value of
all Last Component Stocks immediately after such event, divided by the
aggregate Market Value for all Last Component Stocks immediately prior to
such event.
If a company that has issued a Last Component Stock issues a stock
dividend, declares a stock split or issues new shares pursuant to the
acquisition of another company, then, in each case, the Base Value will be
adjusted (in accordance with the formula described below) so that the Base
Value immediately after the time the particular Last Component Stock
commences trading ex-dividend, the effectiveness of the stock split or the
time new shares of such Last Component Stock commence trading equals (a)
the Base Value immediately prior to such event, multiplied by (b) the
quotient of the aggregate Market Value for all Last Component Stocks
immediately after such event, divided by the aggregate Market Value of all
Last Component Stocks immediately prior to such event. The Base Value used
by the Calculation Agent to calculate the value described above will not
necessarily be adjusted in all cases in which S&P, in its discretion, might
adjust the Base Value (as described below under "The Standard & Poor's 500
Index-Computation of the S&P 500 Index").
If S&P discontinues publication of the S&P 500 Index prior to the period
during which the amount payable with respect to any year is to be
determined and the Calculation Agent determines that no Successor Index is
available at such time, then on each NYSE Business Day until the earlier to
occur of (i) the determination of the amount payable with respect to such
year and (ii) a determination by the Calculation Agent that a Successor
Index is available, the Calculation Agent shall determine the value that
would be used in computing the amount payable with respect to such year by
reference to the method set forth in clauses (1) through (6) above as if
such day were a Calculation Day. The Calculation Agent will cause notice of
each such value to be published not less often than once each month in the
Wall Street Journal (or another newspaper of general circulation), and
arrange for information with respect to such values to be made available by
telephone. Notwithstanding these alternative arrangements, discontinuance
of the publication of the S&P 500 Index may adversely affect trading in the
Notes.
11
<PAGE>
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Notes shall have occurred
and be continuing, the amount payable to a Holder of a Note upon any
acceleration permitted by the Notes, will equal: (i) the principal amount
thereof, plus (ii) an additional amount, if any, calculated as though the
date of early repayment were a December Payment Date and prorated through
such date of early repayment in the same manner as the amount payable on
the December 1992 payment date was prorated. If a bankruptcy proceeding is
commenced in respect of the Company, the claim of the Holder of a Note may
be limited, under Section 502(b)(2) of Title 11 of the United States Code,
to the principal amount of the Note plus an additional amount, if any, of
contingent interest calculated as though the date of the commencement of
the proceeding were the maturity date of the Notes.
NOTE DEPOSITORY
Upon issuance, all Notes will be represented by one or more fully
registered global securities (the "Global Securities"). Each such Global
Security will be deposited with, or on behalf of, The Depository Trust
Company, as Securities Depository, registered in the name of the Securities
Depository or a nominee thereof. Unless and until it is exchanged in whole
or in part for Securities in definitive form, no Global Security may be
transferred except as a whole by the Securities Depository to a nominee of
such Securities Depository or by a nominee of such Securities Depository to
such Securities Depository or another nominee of such Securities Depository
or by such Securities Depository or any such nominee to a successor of such
Securities Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold securities of its
participants ("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 Securities Depository's Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. The Securities Depository is
owned by a number of Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. The Underwriter (as hereinafter defined) is a
Participant. Access to the Securities Depository book-entry system is also
available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
Purchases of Notes must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each Note ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Participant or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Ownership of beneficial interests in such Global Security will
be shown on, and the transfer of such ownership interests will be effected
only through, records maintained by the Securities Depository (with respect
to interests of Participants) and on the records of Participants (with
respect to interests of persons held through Participants). The laws of
some states may 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 own, transfer or pledge beneficial interests in
Global Securities.
So long as the Securities Depository, or its nominee, is the registered
owner of a Global Security, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the Notes
represented by such Global Security for all purposes under the Senior
Indenture. Except as provided below, Beneficial Owners in a Global Security
will not be entitled to have the Notes represented by such Global
Securities registered in their names, will not receive or be entitled to
receive physical delivery of the Notes in definitive registered form and
will not be considered the owners or Holders thereof under the Senior
Indenture. Accordingly,
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<PAGE>
each Person owning a beneficial interest in a Global Security must rely on
the procedures of the Securities Depository 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 Senior
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 Security desires to give or
take any action which a Holder is entitled to give or take under the Senior
Indenture, the Securities Depository 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. Conveyance of notices and other
communications by the Securities Depository to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Payment of the principal of, and amounts payable on any June Payment Date
or December Payment Date with respect to, Notes registered in the name of
the Securities Depository or its nominee will be made to the Securities
Depository or its nominee, as the case may be, as the Holder of the Global
Securities representing such Notes. None of the Company, the Trustee or any
other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Securities Depository, upon receipt
of any payment of principal or amounts payable on any June Payment Date or
December Payment Date in respect of a Global Security, will credit the
accounts of the Participants with payment in amounts proportionate to their
respective holdings in principal amount of beneficial interest in such
Global Security as shown on the records of the Securities Depository. The
Company also expects that payments by Participants to Beneficial Owners
will be governed by standing customer instructions and customary practices,
as is now the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility
of such Participants.
If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not
appointed by the Company within 60 days, (y) the Company executes and
delivers to the Trustee a Company Order to the effect that the Global
Securities shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to the Notes, the Global Securities will be
exchangeable for Notes in definitive form of like tenor and of an equal
aggregate principal amount, in denominations of $1,000 and integral
multiples thereof. Such definitive Notes shall be registered in such name
or names as the Securities Depository shall instruct the Trustee. It is
expected that such instructions may be based upon directions received by
the Securities Depository from Participants with respect to ownership of
beneficial interests in such Global Securities.
THE STANDARD & POOR'S 500 INDEX
All disclosure contained in this Prospectus regarding the S&P 500 Index,
including, without limitation, its make-up, method of calculation and
changes in its components, is derived from publicly available information
prepared by S&P. Neither the Company nor the Underwriter can assure the
accuracy or completeness of the information prepared by S&P.
GENERAL
The S&P 500 Index is published by S&P and is intended to provide an
indication of the pattern of common stock price movement. The calculation
of the value of the S&P 500 Index (discussed below in further detail) is
based on the relative value of the aggregate Market Value (as defined
above) of the common stocks of 500 companies as of a particular time as
compared to the aggregate average Market Value of the common stocks of 500
similar companies during the base period of the years 1941 through 1943. As
of August 31, 1992, the 500 companies included in the S&P 500 Index
represented approximately 76% of the aggregate Market Value of common
stocks traded on The New York Stock Exchange; however, the 500 companies
are not the 500 largest companies listed on The New York Stock Exchange and
not all 500 companies are listed on such exchange. As of August 31, 1992,
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<PAGE>
the aggregate market value of the 500 companies included in the S&P 500
Index represented approximately 70% of the aggregate market value of United
States domestic, public companies. S&P chooses companies for inclusion in
the S&P 500 Index with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in
the common stock population of The New York Stock Exchange, which S&P uses
as an assumed model for the composition of the total market. Relevant
criteria employed by S&P include the viability of the particular company,
the extent to which that company represents the industry group to which it
is assigned, the extent to which the market price of that company's common
stock is generally responsive to changes in the affairs of the respective
industry and the Market Value and trading activity of the common stock of
that company.
COMPUTATION OF THE S&P 500 INDEX
S&P currently computes the S&P 500 Index as of a particular time as
follows:
(1) the Market Value of each component stock is determined as of such
time;
(2) the Market Values of all component stocks as of such time (as
determined under clause (1) above) are aggregated;
(3) the mean average of the Market Values as of each week in the base
period of the years 1941 through 1943 of the common stock of each company
in a group of 500 substantially similar companies is determined;
(4) the mean average Market Values of all such common stocks over such
base period (as determined under clause (3) above) are aggregated (such
aggregate amount being referred to as the "Base Value");
(5) the aggregate Market Value of all component stocks as of such time
(as determined under clause (2) above) is divided by the Base Value; and
(6) the resulting quotient (expressed in decimals) is multiplied by
ten.
While S&P currently employs the above methodology to calculate the S&P 500
Index, no assurance can be given that S&P will not modify or change such
methodology in a manner that may affect the amounts payable on any December
Payment Date to Holders of Notes.
S&P adjusts the foregoing formula to negate the effect of changes in the
Market Value of a component stock that are determined by S&P to be
arbitrary or not due to true market fluctuations. Such changes may result
from such causes as the issuance of stock dividends, the granting to
shareholders of rights to purchase additional shares of such stock, the
purchase thereof by employees pursuant to employee benefit plans, certain
consolidations and acquisitions, the granting to shareholders of rights to
purchase other securities of the company, the substitution by S&P of
particular component stocks in the S&P 500 Index, and other reasons. In all
such cases, S&P first recalculates the aggregate Market Value of all
component stocks (after taking account of the new market price per share of
the particular component stock or the new number of outstanding shares
thereof or both, as the case may be) and then determines the New Base Value
in accordance with the following formula:
New Market Value
Old Base Value X ---------------- = New Base Value
Old Market Value
The result is that the Base Value is adjusted in proportion to any change
in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of
such causes upon the S&P 500 Index.
LICENSE AGREEMENT
S&P and Merrill Lynch Capital Services, Inc. have entered into a non-
exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
14
<PAGE>
owned and published by S&P in connection with certain securities, including
the Notes, and the Company is an authorized sublicensee thereof.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this
Prospectus:
"The Notes are not sponsored, endorsed, sold or promoted by S&P.
S&P makes no representation or warranty, express or implied, to the
Holders of the Notes or any member of the public regarding the
advisability of investing in securities generally or in the Notes
particularly or the ability of the S&P 500 Index to track general
stock market performance. S&P's only relationship to Merrill Lynch
Capital Services, Inc. and the Company (other then transactions
entered into in the ordinary course of business) is the licensing of
certain servicemarks and trade names of S&P and of the S&P 500 Index
which is determined, composed and calculated by S&P without regard to
the Company or the Notes. S&P has no obligation to take the needs of
the Company or the Holders of the Notes into consideration in
determining, composing or calculating the S&P 500 Index. S&P is not
responsible for and has not participated in the determination of the
timing of the sale of the Notes, prices at which the Notes are to
initially be sold, or quantities of the Notes to be issued or in the
determination or calculation of the equation by which the Notes are to
be converted into cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the
Notes."
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities
may from time to time be issued thereunder, without limitation as to
aggregate principal amount, in one or more series and upon such terms as
the Company may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
15
<PAGE>
specifically permitted by the Senior Indenture) on the Voting Stock owned
directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with
or into any other corporation, and the Company may sell, lease or convey
all or substantially all of its assets to any corporation, provided that
(i) the corporation (if other than the Company) formed by or resulting from
any such consolidation or merger or which shall have received such assets
shall be a corporation organized and existing under the laws of the United
States of America or a state thereof and shall assume payment of the
principal of (and premium, if any) and interest on the Senior Debt
Securities and the performance and observance of all of the covenants and
conditions of the Senior Indenture to be performed or observed by the
Company, and (ii) the Company or such successor corporation, as the case
may be, shall not immediately thereafter be in default under the Senior
Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose Holders is required to modify or amend the Indenture;
or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Senior Debt Securities necessary to waive any past default to
less than a majority. No modification or amendment of the Subordinated
Indenture or any Subsequent Indenture for Subordinated Debt Securities may
adversely affect the rights of any holder of Senior Indebtedness without
the consent of such Holder. Except with respect to certain fundamental
provisions, the Holders of at least a majority in principal amount of
Outstanding Senior Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default
with respect to Senior Debt Securities of any series: (a) default in the
payment of any interest or Additional Amounts payable on any Senior Debt
Security of that series when due, continued for 30 days; (b) default in the
payment of any principal or premium, if any, on any Senior Debt Security of
that series when due; (c) default in the deposit of any sinking fund
payment, when due, in respect of any Senior Debt Security of that series;
(d) default in the performance of any other covenant of the Company
contained in the Indenture for the benefit of such series or in the Senior
Debt Securities of such series,
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<PAGE>
continued for 60 days after written notice as provided in the Senior
Indenture; (e) certain events in bankruptcy, insolvency or reorganization;
and (f) any other Event of Default provided with respect to Senior Debt
Securities of that series. The Trustee or the Holders of 25% in principal
amount of the Outstanding Senior Debt Securities of that series may declare
the principal amount (or such lesser amount as may be provided for in the
Senior Debt Securities of that series) of all Outstanding Senior Debt
Securities of that series and the interest due thereon and Additional
Amounts payable in respect thereof, if any to be due and payable
immediately if an Event of Default with respect to Senior Debt Securities
of such series shall occur and be continuing at the time of such
declaration. At any time after a declaration of acceleration has been made
with respect to Senior Debt Securities of any series but before a judgment
or decree for payment of money due has been obtained by the Trustee, the
Holders of a majority in principal amount of the Outstanding Senior Debt
Securities of that series may rescind any declaration of acceleration and
its consequences, if all payments due (other than those due as a result of
acceleration) have been made and all Events of Default have been remedied
or waived. Any Event of Default with respect to Senior Debt Securities of
any series may be waived by the Holders of a majority in principal amount
of all Outstanding Senior Debt Securities of that series, except in a case
of failure to pay principal or premium, if any, or interest or Additional
Amounts payable on any Senior Debt Security of that series for which
payment had not been subsequently made or in respect of a covenant or
provision which cannot be modified or amended without the consent of the
Holder of each Outstanding Senior Debt Security of such series affected.
The Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
S&P 500 MARKET INDEX TARGET-TERM SECURITIES/SM/ DUE JULY 31, 1998
("MITTS/(R)/")
------------
On January 28, 1993, Merrill Lynch & Co., Inc. (the "Company") issued
$16,000,000 aggregate principal amount (1,600,000 Units) of the Securities.
Each $10 principal amount of S&P 500 Market Index Target-Term Securities due
July 31, 1998 (the "Securities" or "MITTS" will be deemed a "Unit" for
purposes of trading and transfer at the Securities Depository described below.
Units will be transferable by the Securities Depository, as more fully described
below, in denominations of whole Units.
The Securities were offered at an original issue price of 100% of the
principal amount thereof, will bear no periodic payments of interest and will
mature on July 31, 1998. At maturity, a Holder of a Security will be entitled to
receive, with respect to each Security, the principal amount thereof, plus a
contingent interest payment (the "Supplemental Redemption Amount"), if any, if
the Final Value (as defined herein) of the S&P 500 Composite Stock Price Index
(the "S&P 500 Index") exceeds 435.49 (the "Initial Value"). If the Final Value
does not exceed the Initial Value, a Holder of a Security will be repaid the
principal amount of the Security, but the Holder will not receive any
Supplemental Redemption Amount. The Securities were issued as a series of Senior
Debt Securities under the Senior Indenture described herein. The Securities are
not redeemable prior to maturity.
The Supplemental Redemption Amount, if any, payable with respect to a
Security at maturity will equal the product of (A) the principal amount of the
applicable Security, and (B) the quotient of the Final Value less the Initial
Value, divided by the Initial Value, and (C) 115%. The calculation of the Final
Value, as more fully described herein, will be based upon certain values of the
S&P 500 Index during the ten Business Days prior to the maturity date of the
Securities.
For information as to the calculation of the Supplemental Redemption
Amount, if any, which will be paid at maturity, the calculation and the
composition of the S&P 500 Index, see "Description of Securities" and "The
Standard & Poor's 500 Index" in this Prospectus. FOR OTHER INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "SPECIAL CONSIDERATIONS" IN
THIS PROSPECTUS.
Ownership of the Securities will be maintained in book-entry form by or
through the Securities Depository. Beneficial owners of the Securities will not
have the right to receive physical certificates evidencing their ownership
except under the limited circumstances described herein.
The Securities are listed on the New York Stock Exchange under the symbol
"MIE".
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------
This Prospectus has been prepared in connection with the Securities and is
to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Securities.
MLPF&S may act as principal or agent in such transactions. The Securities may
be offered on a national securities exchange in the event the particular issue
of Securities has been listed on such exchange, or off such exchange in
negotiated transactions, or otherwise. Sales will be made at prices related to
prevailing prices at the time of sale. The distribution of the Securities will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
------------
MERRILL LYNCH & CO.
------------
THE DATE OF THIS PROSPECTUS IS , 1995.
/(R)/"MITTS" is a registered service mark and /SM/"Market Index Target-Term
Securities" is a service mark of Merrill Lynch & Co., Inc.
<PAGE>
STANDARD & POOR'S CORPORATION ("S&P") DOES NOT GUARANTEE THE ACCURACY
AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
THE COMPANY, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, HOLDERS OF
THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED
UNDER THE LICENSE AGREEMENT DESCRIBED HEREIN OR FOR ANY OTHER USE. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Securities made hereby nor has
the Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Securities shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED
2
<PAGE>
BY REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
3
<PAGE>
SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
If the Final Value is equal to or less than the Initial Value, the
Holders of the Securities will be entitled to receive $10 in respect of
each $10 principal amount of Securities, and no Supplemental Redemption
Amount. This will be true even though the value of the S&P 500 Index as of
some interim period or periods prior to the maturity date of the Securities
may have exceeded the Initial Value because the Supplemental Redemption
Amount on the Securities is calculated on the basis of the Final Value
only.
The $10 minimum to be received by Holders at maturity in respect of
each $10 principal amount of a Security does not reflect any opportunity
cost implied by inflation and other factors relating to the time value of
money.
The S&P 500 Index does not reflect the payment of dividends on the
stocks underlying it and therefore the yield based on the S&P 500 Index to
the maturity of the Securities will not produce the same yield as if such
underlying stocks were purchased and held for a similar period.
TRADING
The Securities are listed on the New York Stock Exchange under the
symbol "MIE". It is expected that the secondary market for the Securities
will be affected by the creditworthiness of the Company and by a number of
other factors.
The trading value of the Securities is expected to depend primarily on
the extent of the appreciation, if any, of the S&P 500 Index over the
Initial Value. If, however, Securities are sold prior to the maturity date
at a time when the S&P 500 Index exceeds the Initial Value, the sale price
may be at a discount from the amount expected to be payable to the Holder
if such excess of the S&P 500 Index over the Initial Value were to prevail
until maturity of the Securities because of the possible fluctuation of the
S&P 500 Index between the time of such sale and the maturity date. (See
"The Standard & Poor's 500 Index-Historical Data on the S&P 500 Index.")
Furthermore, the price at which a Holder will be able to sell Securities
prior to maturity may be at a discount, which could be substantial, from
the principal amount thereof, if, at such time, the S&P 500 Index is below,
equal to or not sufficiently above the Initial Value. A discount could also
result from rising interest rates.
The trading values of the Securities may be affected by a number of
interrelated factors, including the creditworthiness of the Company and
those factors listed below. The relationship among these factors is
complex, including how these factors affect the relative value of the
principal amount of the Securities to be repaid at maturity and the value
of the Supplemental Redemption Amount. Accordingly, investors should be
aware that factors other than the level of the S&P 500 Index are likely to
affect their trading value. The expected effect on the trading value of the
Securities of each of the factors listed below, assuming in each case that
all other factors are held constant, is as follows:
Interest Rates. In general, if U.S. interest rates increase, the
value of the Securities is expected to decrease. If U.S. interest
rates decrease, the value of the Securities is expected to increase.
Interest rates may also affect the U.S. economy, and, in turn, the
value of the S&P 500 Index. Rising interest rates may lower the value
of the S&P 500 Index and, thus, the Securities. Falling interest rates
may increase the value of the S&P 500 Index and, thus, may increase
the value of the Securities.
4
<PAGE>
Volatility of the S&P 500 Index. If the volatility of the S&P 500
Index increases, the trading value of the Securities is expected to
increase. If the volatility of the S&P 500 Index decreases, the
trading value of the Securities is expected to decrease.
Time Remaining to Maturity. The Securities may trade at a value
above that which may be inferred from the level of interest rates and
the S&P 500 Index. This difference will reflect a "time premium" due
to expectations concerning the value of the S&P 500 Index during the
period prior to maturity of the Securities. As the time remaining to
maturity of the Securities decreases, however, this time premium is
expected to decrease, thus decreasing the trading value of the
Securities.
Dividend Rates in the United States. If dividend rates on the
stocks comprising the S&P 500 Index increase, the value of the
Securities is expected to decrease. Conversely, if dividend rates on
the stocks comprising the S&P 500 Index decrease, the value of the
Securities is expected to increase. However, in general, rising U.S.
corporate dividend rates may increase the S&P 500 Index and, in turn,
increase the value of the Securities. Conversely, falling U.S.
dividend rates may decrease the S&P 500 Index and, in turn, decrease
the value of the Securities.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully
considering the suitability of the Securities in the light of their
particular circumstances.
Investors should also consider the tax consequences of investing in
the Securities and should consult their tax advisors.
DESCRIPTION OF SECURITIES
GENERAL
The Securities were issued as a series of Senior Debt Securities under
the Senior Indenture, dated as of April 1, 1983, as amended and restated,
as described below. The principal amount of each Security equals $10 for
each $10 original price to the public. The Securities will mature on July
31, 1998.
No periodic payments of interest will be payable with respect to the
Securities. (See "Payment at Maturity", below.)
The Securities are not subject to redemption by the Company or at the
option of any Holder prior to maturity. Upon the occurrence of an Event of
Default with respect to the Securities, Holders of the Securities may
accelerate the maturity of the Securities, as described under "Description
of Securities-Events of Default and Acceleration" and "Other Terms-Events
of Default" in this Prospectus.
The Securities were issued in denominations of whole Units.
PAYMENT AT MATURITY
At maturity, a Holder of a Security will be entitled to receive the
principal amount thereof ($10 for each $10 price to public) plus a
Supplemental Redemption Amount, if any, all as provided below. If the Final
Value of the S&P 500 Index does not exceed the Initial Value, a Holder of a
Security will be repaid the principal amount
5
<PAGE>
of the Security at maturity, but will not be entitled to receive any
contingent interest (i.e., Supplemental Redemption Amount).
At maturity, a Holder of a Security will be entitled to receive, with
respect to each such Security, (i) the principal amount thereof, and (ii)
the Supplemental Redemption Amount, if any, equal in amount to:
(Final Value - Initial Value)
Principal X (---------------------------) X 115%
( Initial Value )
provided, however, that the Supplemental Redemption Amount will not be less
than zero. The Initial Value of the S&P 500 Index is 435.49. If the Final
Value does not exceed the Initial Value, the Supplemental Redemption Amount
will equal zero and a Holder of a Security will receive only the principal
amount thereof ($10 for each $10 price to public).
The Final Value of the S&P 500 Index will be determined by State Street
Bank and Trust Company (the "Calculation Agent") and will equal the average
(mean) of the closing values of the S&P 500 Index as calculated by S&P on
the tenth Business Day (as defined below) prior to the maturity date
(provided that a Market Disruption Event, as defined below, shall not have
occurred on such day) and on each succeeding Business Day (provided that a
Market Disruption Event shall not have occurred on the applicable day) up
to and including the fourth Business Day prior to the maturity date (each,
a "Calculation Day") until the Calculation Agent has so determined such
closing values for five Business Days. If a Market Disruption Event occurs
on one or more of the Business Days during the period specified above, the
Final Value will equal the average of the values on Business Days on which
a Market Disruption Event did not occur or, if there is only one such
Business Day, the value on such day. If Market Disruption Events occur on
all of such Business Days during such period, the Final Value shall equal
the closing value of the S&P 500 Index on the fourth Business Day prior to
the maturity date regardless of whether a Market Disruption Event shall
have occurred on such day. For purposes of determining the Final Value, a
"Business Day" is a day on which The New York Stock Exchange is open for
trading. All determinations made by the Calculation Agent shall be at the
sole discretion of the Calculation Agent and, in the absence of manifest
error, shall be conclusive for all purposes and binding on the Company and
Holders of the Securities.
If S&P discontinues publication of the S&P 500 Index and S&P or another
entity publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to the S&P 500 Index
(any such index being referred to hereinafter as a "Successor Index"),
then, upon the Calculation Agent's notification of such determination to
the Trustee and the Company, the Calculation Agent will substitute the
Successor Index as calculated by S&P or such other entity for the S&P 500
Index and calculate the Final Value as described in the preceding
paragraph. Upon any selection by the Calculation Agent of a Successor
Index, the Company shall cause notice thereof to be published in the Wall
Street Journal (or another newspaper of general circulation) within three
Business Days of such selection.
If S&P discontinues publication of the S&P 500 Index and a Successor
Index is not selected by the Calculation Agent or is no longer published on
any of the Calculation Days, the value to be substituted for the S&P 500
Index for any such Calculation Day used to calculate the Supplemental
Redemption Amount, if any, at maturity will be calculated as described
below under "Discontinuance of the S&P 500 Index."
If a Successor Index is selected or the Calculation Agent calculates a
value as a substitute for the S&P 500 Index as described below, such
Successor Index or value shall be substituted for the S&P 500 Index for all
purposes, including for purposes of determining whether a Market Disruption
Event exists.
6
<PAGE>
If at any time the method of calculating the S&P 500 Index, or the value
thereof, is changed in a material respect, or if the S&P 500 Index is in
any other way modified so that such Index does not, in the opinion of the
Calculation Agent, fairly represent the value of the S&P 500 Index had such
changes or modifications not been made, then, from and after such time, the
Calculation Agent shall, at the close of business in New York, New York, on
each date that the closing value with respect to the Final Value is to be
calculated, make such adjustments as, in the good faith judgment of the
Calculation Agent, may be necessary in order to arrive at a calculation of
a value of a stock index comparable to the S&P 500 Index as if such changes
or modifications had not been made, and calculate such closing value with
reference to the S&P 500 Index, as adjusted. Accordingly, if the method of
calculating the S&P 500 Index is modified so that the value of such Index
is a fraction or a multiple of what it would have been if it had not been
modified (e.g., due to a split in the Index), then the Calculation Agent
shall adjust such Index in order to arrive at a value of the S&P 500 Index
as if it had not been modified (e.g., as if such split had not occurred).
"Market Disruption Event" means either of the following events, as
determined by the Calculation Agent:
(i) the material limitation (limitations pursuant to New York Stock
Exchange Rule 80A (or any applicable rule or regulation enacted or
promulgated by the New York Stock Exchange, any other self regulatory
organization or the Securities and Exchange Commission of similar scope
as determined by the Calculation Agent) on trading during significant
market fluctuations shall be considered "material" for purposes of this
definition) or suspension, in each case, for more than two hours of
trading in 100 or more of the securities included in the S&P 500 Index,
or
(ii) the suspension or material limitation, in each case, for more
than two hours of trading (whether by reason of movements in price
otherwise exceeding levels permitted by the relevant exchange or
otherwise) in (A) futures contracts related to the S&P 500 Index which
are traded on the Chicago Mercantile Exchange or (B) option contracts
related to the S&P 500 Index which are traded on the Chicago Board
Options Exchange, Inc.
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
The following table illustrates, for a range of hypothetical Final
Values, the percentage change in the S&P 500 Index from the date of pricing
of the Securities offered hereby until maturity, the Supplemental
Redemption Amount at maturity for each $10 principal amount of Securities,
and the pretax annualized rate of return to Holders of Securities and the
pretax annualized rate of return of an investment in the stocks underlying
the S&P 500 (which includes an aggregate dividend yield of 3% per annum as
more fully described below).
7
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL
REDEMPTION AMOUNT PRETAX ANNUALIZED
HYPOTHETICAL FINAL PERCENTAGE CHANGE PER $10 PRINCIPAL MITTS PRETAX RATE OF RETURN OF
VALUE OF THE S&P IN THE S&P 500 AMOUNT OF ANNUALIZED RATE OF STOCKS UNDERLYING
500 INDEX INDEX SECURITIES RETURN/(1)/ S&P 500/(1)(2)/
------------------ ----------------- ------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
220 -50% $ 0.00 0.00% -9.27%
264 -40% 0.00 0.00% -6.14%
308 -30% 0.00 0.00% -3.43%
352 -20% 0.00 0.00% -1.05%
396 -10% 0.00 0.00% 1.08%
440/(3)/ 0% 0.00 0.00% 3.01%
484 10% 1.15 1.99% 4.78%
528 20% 2.30 3.80% 6.41%
572 30% 3.45 5.46% 7.93%
616 40% 4.60 7.00% 9.35%
660 50% 5.75 8.43% 10.68%
704 60% 6.90 9.77% 11.93%
748 70% 8.05 11.03% 13.12%
792 80% 9.20 12.22% 14.25%
836 90% 10.35 13.34% 15.32%
880 100% 11.50 14.41% 16.35%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes (i) a five and one-half year maturity for the
Securities; (ii) an investment of a fixed amount in the stocks underlying
the S&P 500 Index with the allocation of such amount reflecting the
relative weights of such stocks in the S&P 500 Index; (iii) a percentage
change in the aggregate price of such stocks that reflects the percentage
change in the S&P 500 Index; (iv) a constant dividend yield of 3% per
annum, paid quarterly from the date of initial delivery of Securities,
applied to the value of the S&P 500 Index at the end of each such quarter
assuming such value increases or decreases linearly from 400 to the
applicable hypothetical Final Value; and (v) no transaction fees or
expenses.
(3) This value is the assumed Initial Value for purposes of calculating the
above table. The actual Initial Value is 435.49.
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the pretax
annualized rate of return resulting therefrom will depend entirely on the
Initial Value, and on the actual Final Value determined by the Calculation
Agent as provided herein.
The Indenture provides that the Indenture and the Notes will be governed
by and construed in accordance with the laws of the State of New York.
Under present New York law, the maximum rate of interest is 25% per annum
on a simple interest basis. This limit may not apply to Securities in which
$2,500,000 or more has been invested. While the Company believes that New
York law would be given effect by a state or federal court sitting outside
of New York, state laws frequently regulate the amount of interest that may
be charged to and paid by a borrower (including, in some cases, corporate
borrowers). All payments under the Securities (other than the return of
principal) could be considered interest for the purpose of state usury
laws. The Company has covenanted for the benefit of the Holders of the
Notes, to the extent permitted by law, not to claim voluntarily the
benefits of any laws concerning usurious rates of interest against a Holder
of the Securities.
DISCONTINUANCE OF THE S&P 500 INDEX AND SUCCESSOR INDEX
If S&P discontinues publication of the S&P 500 Index and a Successor
Index is available, then the amount payable at maturity or upon earlier
acceleration will be determined by reference to the Successor Index, as
provided above.
8
<PAGE>
If the publication of the S&P 500 Index is discontinued and S&P or
another entity does not publish a Successor Index on any of the Calculation
Days, the value to be substituted for the S&P 500 Index for any such
Calculation Day used to calculate the Supplemental Redemption Amount, if
any, at maturity will be the value computed by the Calculation Agent for
each such Calculation Day in accordance with the following procedures:
(1) identifying the component stocks of the S&P 500 Index or any
Successor Index as of the last date on which either of such indices was
calculated by S&P or another entity and published by S&P or such other
entity (each such component stock is a "Last Component Stock");
(2) for each Last Component Stock, calculating as of each such
Calculation Day the product of the market price per share and the number
of the then outstanding shares (such product referred to as the "Market
Value" of such stock), by reference to (a) the closing market price per
share of such Last Component Stock as quoted by the New York Stock
Exchange or the American Stock Exchange or any other registered national
securities exchange that is the primary market for such Last Component
Stock, or if no such quotation is available, then the closing market
price as quoted by any other registered national securities exchange or
the National Association of Securities Dealers Automated Quotation
National Market System ("NASDAQ"), or if no such price is quoted, then
the market price from the best available source as determined by the
Calculation Agent (collectively, the "Exchanges") and (b) the most recent
publicly available statement of the number of outstanding shares of such
Last Component Stock;
(3) aggregating the Market Values obtained in clause (2) for all Last
Component Stocks;
(4) ascertaining the Base Value (as defined below under "The Standard
& Poor's 500 Index-Computation of the Index") in effect as of the last
day on which either the S&P 500 Index or any Successor Index was
published by S&P or another entity, adjusted as described below;
(5) dividing the aggregate Market Value of all Last Component Stocks
by the Base Value (adjusted as aforesaid);
(6) multiplying the resulting quotient (expressed in decimals) by ten.
If any Last Component Stock is no longer publicly traded on any
registered national securities exchange or in the over-the-counter market,
the last available market price per share for such Last Component Stock as
quoted by any registered national securities exchange or in the over-the-
counter market, and the number of outstanding shares thereof at such time,
will be used in computing the last available Market Value of such Last
Component Stock. Such Market Value will be used in all computations of the
S&P 500 Index thereafter.
If a company that has issued a Last Component Stock and another company
that has issued a Last Component Stock are consolidated to form a new
company, the common stock of such new company will be considered a Last
Component Stock and the common stocks of the constituent companies will no
longer be considered Last Component Stocks. If any company that has issued
a Last Component Stock merges with, or acquires, a company that has not
issued a Last Component Stock, the common stock of the surviving
corporation will, upon the effectiveness of such merger or acquisition, be
considered a Last Component Stock. In each such case, the Base Value will
be adjusted so that the Base Value immediately after such consolidation,
merger or acquisition will equal (a) the Base Value immediately prior to
such event, multiplied by (b) the quotient of the aggregate Market Value of
all Last Component Stocks immediately after such event, divided by the
aggregate Market Value for all Last Component Stocks immediately prior to
such event.
If a company that has issued a Last Component Stock issues a stock
dividend, declares a stock split or issues new shares pursuant to the
acquisition of another company, then, in each case, the Base Value will be
adjusted (in accordance with the formula described below) so that the Base
Value immediately after the time the particular Last Component Stock
commences trading ex-dividend, the effectiveness of the stock split or the
time new shares of such Last Component Stock commence trading equals (a)
the Base Value immediately prior to such event, multiplied by (b) the
quotient of the aggregate Market Value for all Last Component Stocks
immediately after such event, divided by the aggregate Market Value of all
Last Component Stocks immediately prior to such event. The Base Value used
9
<PAGE>
by the Calculation Agent to calculate the value described above will not
necessarily be adjusted in all cases in which S&P, in its discretion, might
adjust the Base Value (as described below under "The Standard & Poor's 500
Index-Computation of the S&P 500 Index").
If S&P discontinues publication of the S&P 500 Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
Calculation Agent determines that no Successor Index is available at such
time, then on each Business Day until the earlier to occur of (i) the
determination of the Final Value and (ii) a determination by the
Calculation Agent that a Successor Index is available, the Calculation
Agent shall determine the value that would be used in computing the
Supplemental Redemption Amount by reference to the method set forth in
clauses (1) through (6) in the fourth preceding paragraph above as if such
day were a Calculation Day. The Calculation Agent will cause notice of each
such value to be published not less often than once each month in the Wall
Street Journal (or another newspaper of general circulation), and arrange
for information with respect to such values to be made available by
telephone. Notwithstanding these alternative arrangements, discontinuance
of the publication of the S&P 500 Index may adversely affect trading in the
Securities.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a Holder of a Security
upon any acceleration permitted by the Securities, with respect to each $10
principal amount thereof, will be equal to: (i) the initial issue price
($10), plus (ii) an additional amount, if any, of contingent interest
calculated as though the date of early repayment were the maturity date of
the Securities. See "Description of Securities-Payment at Maturity" in this
Prospectus. If a bankruptcy proceeding is commenced in respect of the
Company, the claim of the Holder of a Security may be limited, under
Section 502(b)(2) of Title 11 of the United States Code, to the principal
amount of the Security plus an additional amount, if any, of contingent
interest calculated as though the date of the commencement of the
proceeding were the maturity date of the Securities.
In case of default in payment at the maturity date of the Securities
(whether at their stated maturity or upon acceleration), from and after the
maturity date the Securities shall bear interest, payable upon demand of
the Holders thereof, at the rate of 7% per annum (to the extent that
payment of such interest shall be legally enforceable) on the unpaid amount
due and payable on such date in accordance with the terms of the Securities
to the date payment of such amount has been made or duly provided for.
SECURITIES DEPOSITORY
Upon issuance, all Securities will be represented by one or more fully
registered global securities (the "Global Securities"). Each such Global
Security will be deposited with, or on behalf of, The Depository Trust
Company, as Securities Depository, registered in the name of the Securities
Depository or a nominee thereof. Unless and until it is exchanged in whole
or in part for Securities in definitive form, no Global Security may be
transferred except as a whole by the Securities Depository to a nominee of
such Securities Depository or by a nominee of such Securities Depository to
such Securities Depository or another nominee of such Securities Depository
or by such Securities Depository or any such nominee to a successor of such
Securities Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold securities of its
participants ("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.
10
<PAGE>
The Securities Depository's Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. The Securities Depository is owned by a number of
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the Securities Depository book-entry system is also available to
others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Purchases of Securities must be made by or through Participants, which
will receive a credit on the records of the Securities Depository. The
ownership interest of each actual purchaser of each Security ("Beneficial
Owner") is in turn to be recorded on the Participants' or Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from the Securities Depository of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Participant or Indirect Participant through which the
Beneficial Owner entered into the transaction. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained
by the Securities Depository (with respect to interests of Participants)
and on the records of Participants (with respect to interests of persons
held through Participants). The laws of some states may 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
own, transfer or pledge beneficial interests in Global Securities.
So long as the Securities Depository, or its nominee, is the registered
owner of a Global Security, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the
Securities represented by such Global Security for all purposes under the
Senior Indenture. Except as provided below, Beneficial Owners in a Global
Security will not be entitled to have the Securities represented by such
Global Securities registered in their names, will not receive or be
entitled to receive physical delivery of the Securities in definitive form
and will not be considered the owners or Holders thereof under the Senior
Indenture. Accordingly, each Person owning a beneficial interest in a
Global Security must rely on the procedures of the Securities Depository
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 Senior 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 Security desires to give or take any action which a Holder is
entitled to give or take under the Senior Indenture, the Securities
Depository 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. Conveyance of notices and other communications by the Securities
Depository to Participants, by Participants to Indirect Participants, and
by Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Payment of the principal of, and any Supplemental Redemption Amount with
respect to, Securities registered in the name of the Securities Depository
or its nominee will be made to the Securities Depository or its nominee, as
the case may be, as the Holder of the Global Securities representing such
Securities. None of the Company, the Trustee or any other agent of the
Company or agent of the Trustee will have any responsibility or liability
for any aspect of the records relating to or payments made on account of
beneficial ownership interests or for supervising or reviewing any records
relating to such beneficial ownership interests. The Company expects that
the Securities Depository, upon receipt of any payment of principal or any
Supplemental Redemption Amount in respect of a Global Security, will credit
the accounts of the Participants with payment in amounts proportionate to
their respective holdings in principal amount of beneficial interest in
such Global Security as shown on the records of the Securities Depository.
The Company also expects that payments by Participants to Beneficial Owners
will be governed by standing customer instructions and customary practices,
as is now the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility
of such Participants.
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If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not
appointed by the Company within 60 days, (y) the Company executes and
delivers to the Trustee a Company Order to the effect that the Global
Securities shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to the Securities, the Global Securities
will be exchangeable for Securities in definitive form of like tenor and of
an equal aggregate principal amount, in denominations of $10 and integral
multiples thereof. Such definitive Securities shall be registered in such
name or names as the Securities Depository shall instruct the Trustee. It
is expected that such instructions may be based upon directions received by
the Securities Depository from Participants with respect to ownership of
beneficial interests in such Global Securities.
THE STANDARD & POOR'S 500 INDEX
All disclosure contained in this Prospectus regarding the S&P 500 Index,
including, without limitation, its make-up, method of calculation and
changes in its components, is derived from publicly available information
prepared by S&P. Neither the Company nor the Underwriter takes any
responsibility for the accuracy or completeness of such information.
GENERAL
The S&P 500 Index is published by S&P and is intended to provide an
indication of the pattern of common stock price movement. The calculation
of the value of the S&P 500 Index (discussed below in further detail) is
based on the relative value of the aggregate Market Value (as defined
above) of the common stocks of 500 companies as of a particular time as
compared to the aggregate average Market Value of the common stocks of 500
similar companies during the base period of the years 1941 through 1943. As
of December 31, 1992, the 500 companies included in the S&P 500 Index
represented approximately 76% of the aggregate Market Value of common
stocks traded on The New York Stock Exchange; however, the 500 companies
are not the 500 largest companies listed on The New York Stock Exchange and
not all 500 companies are listed on such exchange. As of December 31, 1992,
the aggregate market value of the 500 companies included in the S&P 500
Index represented approximately 70% of the aggregate market value of United
States domestic, public companies. S&P chooses companies for inclusion in
the S&P 500 Index with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in
the common stock population of The New York Stock Exchange, which S&P uses
as an assumed model for the composition of the total market. Relevant
criteria employed by S&P include the viability of the particular company,
the extent to which that company represents the industry group to which it
is assigned, the extent to which the market price of that company's common
stock is generally responsive to changes in the affairs of the respective
industry and the Market Value and trading activity of the common stock of
that company.
COMPUTATION OF THE S&P 500 INDEX
S&P currently computes the S&P 500 Index as of a particular time as
follows:
(1) the Market Value of each component stock is determined as of such
time;
(2) the Market Value of all component stocks as of such time (as
determined under clause (1) above) are aggregated;
(3) the mean average of the Market Values as of each week in the
base period of the years 1941 through 1943 of the common stock of
each company in a group of 500 substantially similar companies is
determined;
(4) the mean average Market Values of all such common stocks over
such base period (as determined under clause (3) above) are
aggregated (such aggregate amount being referred to as the "Base
Value");
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(5) the aggregate Market Value of all component stocks as of such
time (as determined under clause (2) above) is divided by the Base
Value; and
(6) the resulting quotient (expressed in decimals) is multiplied by
ten.
While S&P currently employs the above methodology to calculate the S&P 500
Index, no assurance can be given that S&P will not modify or change such
methodology in a manner that may affect the Supplemental Redemption Amount,
if any, payable to Holders of Securities upon maturity or otherwise.
S&P adjusts the foregoing formula to negate the effect of changes in the
Market Value of a component stock that are determined by S&P to be
arbitrary or not due to true market fluctuations. Such changes may result
from such causes as the issuance of stock dividends, the granting to
shareholders of rights to purchase additional shares of such stock, the
purchase thereof by employees pursuant to employee benefit plans, certain
consolidations and acquisitions, the granting to shareholders of rights to
purchase other securities of the company, the substitution by S&P of
particular component stocks in the S&P 500 Index, and other reasons. In all
such cases, S&P first recalculates the aggregate Market Value of all
component stocks (after taking account of the new market price per share of
the particular component stock or the new number of outstanding shares
thereof or both, as the case may be) and then determines the New Base Value
in accordance with the following formula:
Old Base Value x New Market Value = New Base Value
----------------
Old Market Value
The result is that the Base Value is adjusted in proportion to any change
in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of
such causes upon the S&P 500 Index.
LICENSE AGREEMENT
S&P and Merrill Lynch Capital Services, Inc. have entered into a non-
exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
owned and published by S&P in connection with certain securities, including
the Securities, and the Company is an authorized sublicensee thereof.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this
Prospectus:
"The Securities are not sponsored, endorsed, sold or promoted by S&P.
S&P makes no representation or warranty, express or implied, to the
Holders of the Securities or any member of the public regarding the
advisability of investing in securities generally or in the Securities
particularly or the ability of the S&P 500 Index to track general stock
market performance. S&P's only relationship to Merrill Lynch Capital
Services, Inc. and the Company (other then transactions entered into in
the ordinary course of business) is the licensing of certain service
marks and trade names of S&P and of the S&P 500 Index which is
determined, composed and calculated by S&P without regard to the Company
or the Securities. S&P has no obligation to take the needs of the Company
or the Holders of the Securities into consideration in determining,
composing or calculating the S&P 500 Index. S&P is not responsible for
and has not participated in the determination of the timing of the sale
of the Securities, prices at which the Securities are to initially be
sold, or quantities of the Securities to be issued or in the
determination or calculation of the equation by which the Securities are
to be converted into
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cash. S&P has no obligation or liability in connection with the
administration, marketing or trading of the Securities."
A potential investor should review the historical performance of the S&P
500 Index. The historical performance of the S&P 500 Index should not be
taken as an indication of future performance, and no assurance can be given
that the S&P 500 Index will increase sufficiently to cause the beneficial
owners of the Securities to receive a Supplemental Redemption Amount at the
maturity of the Securities.
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities may
from time to time be issued thereunder, without limitation as to aggregate
principal amount, in one or more series and upon such terms as the Company
may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Senior Indenture) on the Voting Stock owned
directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
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LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all
or substantially all of its assets to any corporation, provided that (i)
the corporation (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received such assets shall
be a corporation organized and existing under the laws of the United States
of America or a state thereof and shall assume payment of the principal of
(and premium, if any) and interest on the Senior Debt Securities and the
performance and observance of all of the covenants and conditions of the
Senior Indenture to be performed or observed by the Company, and (ii) the
Company or such successor corporation, as the case may be, shall not
immediately thereafter be in default under the Senior Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose Holders is required to modify or amend the Indenture;
or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Senior Debt Securities necessary to waive any past default to
less than a majority. No modification or amendment of the Subordinated
Indenture or any Subsequent Indenture for Subordinated Debt Securities may
adversely affect the rights of any holder of Senior Indebtedness without
the consent of such Holder. Except with respect to certain fundamental
provisions, the Holders of at least a majority in principal amount of
Outstanding Senior Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default with
respect to Senior Debt Securities of any series: (a) default in the payment
of any interest or Additional Amounts payable on any Senior Debt Security
of that series when due, continued for 30 days; (b) default in the payment
of any principal or premium, if any, on any Senior Debt Security of that
series when due; (c) default in the deposit of any sinking fund payment,
when due, in respect of any Senior Debt Security of that series; (d)
default in the performance of any other covenant of the Company contained
in the Indenture for the benefit of such series or in the Senior Debt
Securities of such series,
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continued for 60 days after written notice as provided in the Senior
Indenture; (e) certain events in bankruptcy, insolvency or reorganization;
and (f) any other Event of Default provided with respect to Senior Debt
Securities of that series. The Trustee or the Holders of 25% in principal
amount of the Outstanding Senior Debt Securities of that series may declare
the principal amount (or such lesser amount as may be provided for in the
Senior Debt Securities of that series) of all Outstanding Senior Debt
Securities of that series and the interest due thereon and Additional
Amounts payable in respect thereof, if any to be due and payable
immediately if an Event of Default with respect to Senior Debt Securities
of such series shall occur and be continuing at the time of such
declaration. At any time after a declaration of acceleration has been made
with respect to Senior Debt Securities of any series but before a judgment
or decree for payment of money due has been obtained by the Trustee, the
Holders of a majority in principal amount of the Outstanding Senior Debt
Securities of that series may rescind any declaration of acceleration and
its consequences, if all payments due (other than those due as a result of
acceleration) have been made and all Events of Default have been remedied
or waived. Any Event of Default with respect to Senior Debt Securities of
any series may be waived by the Holders of a majority in principal amount
of all Outstanding Senior Debt Securities of that series, except in a case
of failure to pay principal or premium, if any, or interest or Additional
Amounts payable on any Senior Debt Security of that series for which
payment had not been subsequently made or in respect of a covenant or
provision which cannot be modified or amended without the consent of the
Holder of each Outstanding Senior Debt Security of such series affected.
The Holders of a majority in principal amount of the Outstanding Senior
Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a statement as
to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied.
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Deloitte & Touche LLP are not subject to the liability provisions of
Section 11 of the Act for any such report on unaudited interim financial
information because any such report is not a "report" or a "part" of the
registration statement prepared or certified by an accountant within the
meaning of Sections 7 and 11 of the Act.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
GLOBAL TELECOMMUNICATIONS PORTFOLIO MARKET INDEX TARGET-TERM SECURITIES/SM/
DUE OCTOBER 15, 1998
("MITTS/(R)/")
______________________
On September 13, 1993, Merrill Lynch & Co., Inc. (the "Company") issued an
aggregate principal amount of $110,000,000 Global Telecommunications Portfolio
Market Index Target-Term Securities due October 15, 1998 (the "Securities" or
"MITTS"). Each $10 principal amount of Securities will be deemed a "Unit" for
purposes of trading and transfer at the Securities Depository described below.
Units will be transferable by the Securities Depository, as more fully described
below, in denominations of whole Units.
The Securities were offered at an original issue price of 100% of the
principal amount thereof, will bear no periodic payments of interest and will
mature on October 15, 1998. At maturity, a beneficial owner of a Security will
be paid an amount based upon the change in the value of a portfolio of specified
telecommunications industry stocks of issuers organized in the United States and
abroad measured from September 2, 1993 (the "Original Portfolio Value") to the
Closing Portfolio Value, all as more fully described herein; provided, however,
that the amount payable at maturity will not be less than $9.00 for each Unit of
the Securities (the "Minimum Payment"). The Closing Portfolio Value will be
based on certain values of the specified telecommunications industry stocks
during a period prior to the maturity date of the Securities.
IF THE CLOSING PORTFOLIO VALUE IS LESS THAN THE ORIGINAL PORTFOLIO VALUE,
THE AMOUNT PAYABLE AT MATURITY WITH RESPECT TO A SECURITY WILL BE LESS THAN THE
PRINCIPAL AMOUNT OF SUCH SECURITY.
For information as to the calculation of the amount that will be paid at
maturity and the calculation and the composition of the global
telecommunications industry portfolio, see "Description of Securities" and "The
Portfolio" in this Prospectus. FOR OTHER INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS, SEE "SPECIAL CONSIDERATIONS" IN THIS PROSPECTUS.
Ownership of the Securities will be maintained in book-entry form by or
through the Securities Depository. Beneficial owners of the Securities will not
have the right to receive physical certificates evidencing their ownership
except under the limited circumstances described herein.
The Securities have been listed on the New York Stock Exchange under the
Symbol "MLC".
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________________
This Prospectus has been prepared in connection with the Securities and is
to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly-owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Securities.
MLPF&S may act as principal or agent in such transactions. The Securities may
be offered on a national securities exchange in the event the particular issue
of Securities has been listed on such exchange, or off such exchange in
negotiated transactions, or otherwise. Sales will be made at prices related to
prevailing prices at the time of sale. The distribution of the Securities will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
___________________
MERRILL LYNCH & CO.
___________________
The date of this Prospectus is , 1995.
/(R)/"MITTS" is a registered service mark and /SM/"Market Index Target-Term
Securities" is a service mark of Merrill Lynch & Co., Inc.
<PAGE>
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Securities made hereby nor has
the Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
30, 1994, Quarterly Reports on Form 10-Q for the periods ended March 31,
1995 and June 30, 1995, and Current Reports on Form 8-K dated January 12,
1995, January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995,
March 9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995,
July 21, 1995, August 1, 1995, and August 2, 1995 filed pursuant to Section
13 of the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the maturity of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
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MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
If the Closing Portfolio Value is less than the Original Portfolio
Value, beneficial owners of the Securities will receive less than the
principal amount of such Securities at maturity, but not less than the
Minimum Payment. Beneficial owners would receive only the return of
principal if the Closing Portfolio Value should equal the Original
Portfolio Value. This will be true even though the Portfolio Value as of
some interim period or periods prior to the Calculation Period may have
exceeded the Original Portfolio Value since the Closing Portfolio Value is
calculated on the basis of the average of the value of Portfolio Securities
only on the Calculation Days.
Even if the principal of the Securities is fully returned, such return
of principal does not reflect any opportunity cost implied by inflation and
other factors relating to the time value of money.
3
<PAGE>
The return based on the Closing Portfolio Value relative to the
Original Portfolio Value generally will not produce the same return as if
the Portfolio Securities were purchased and held for a similar period,
because, among other reasons, any payment at maturity on the Securities
based on an increase in the value of the Portfolio will not reflect the
payment of dividends on the Portfolio Securities.
The Indenture provides that the Indenture and the Securities will be
governed by and construed in accordance with the laws of New York. Under
present New York law the maximum rate of interest is 25% per annum on a
simple interest basis. This limit may not apply to Securities in which
$2,500,000 or more has been invested. While the Company believes that New
York law would be given effect by a state or Federal court sitting outside
of New York, state laws frequently regulate the amount of interest that may
be charged to and paid by a borrower (including, in some cases, corporate
borrowers). All payments under the Securities (other than the return of
principal) could be considered interest for the purpose of state usury
laws. The Company will covenant for the benefit of the Holders of the
Securities, to the extent permitted by law, not to claim voluntarily the
benefits of any laws concerning usurious rates of interest against a Holder
of the Securities.
TRADING
The Securities have been listed on the New York Stock Exchange under
the Symbol "MLC". There can be no assurance as to how the Securities will
trade in the secondary market or whether such market will be liquid. It is
expected that the secondary market for the Securities will be affected by
the creditworthiness of the Company and by a number of other factors. The
trading value of the Securities is expected to depend primarily on the
extent of the appreciation, if any, of the Portfolio Value over the
Original Portfolio Value. If, however, Securities are sold prior to the
maturity date at a time when the Portfolio Value exceeds the Original
Portfolio Value, the sale price may be at a discount from the amount
expected to be payable to the beneficial owner if such excess of the
Portfolio Value over the Original Portfolio Value were to prevail during
the Calculation Period. Furthermore, the price at which a beneficial owner
will be able to sell Securities prior to maturity may be at a discount,
which could be substantial, from the principal amount thereof, if, at such
time, the Portfolio Value is below, equal to or not sufficiently above the
Original Portfolio Value. A discount could also result from rising interest
rates.
The trading values of the Securities may be affected by a number of
interrelated factors, including those listed below. The relationship among
these factors is complex, including how these factors affect the value of
the principal amount of the Securities payable at maturity, if any, in
excess of the principal amount of the Securities. Accordingly, investors
should be aware that factors other than the level of the Portfolio Value
are likely to affect their trading value. The expected effect on the
trading value of the Securities of each of the factors listed below,
assuming in each case that all other factors are held constant, is as
follows:
Interest Rates. In general, if U.S. interest rates increase, the value
of the Securities is expected to decrease. If U.S. interest rates decrease,
the value of the Securities is expected to increase. Local interest rates
may also affect the economies of countries in which issuers of the
respective Portfolio Securities (or shares underlying such securities)
operate, and, in turn, affect the Portfolio Value.
Volatility of the Portfolio Value. If the volatility of the Portfolio
Value increases, the trading value of the Securities is expected to
increase. If the volatility of the Portfolio Value decreases, the trading
value of the Securities is expected to decrease.
Time Remaining to Maturity. The Securities may trade at a value above
that which may be inferred from the level of the Portfolio Value. This
difference will reflect a "time premium" due to expectations concerning the
Portfolio Value during the period prior to maturity of the Securities. As
the time remaining to maturity of the Securities decreases, however, this
time premium is expected to decrease, thus decreasing the trading value of
the Securities.
Dividend Rates. If dividend rates on the Portfolio Securities (or
shares underlying such securities) increase, the value of the Securities is
expected to decrease. Conversely, if dividend rates on the Portfolio
Securities decrease,
4
<PAGE>
the value of the Securities is expected to increase. Local general
corporate dividend rates may also affect the Portfolio Value and, in turn,
the value of the Securities.
FOREIGN CURRENCY EXCHANGE AND FOREIGN MARKET
The Securities are U.S. dollar-denominated securities issued by the
Company, a United States corporation. Investments in the Securities do not
give the beneficial owners any right to receive any Portfolio Security or
any other ownership right or interest in the Portfolio Securities, although
the return on the investment in the Securities is based on the Portfolio
Value of the Portfolio Securities. Certain of the Portfolio Securities (or
securities underlying DRs included in the Portfolio) have been issued by
non-United States companies, and certain of the Portfolio Securities and
the underlying securities represented by the DRs are quoted in currencies
other than the U.S. dollar. Investments in securities indexed to the value
of non-United States securities involve certain risks. Fluctuations in
foreign exchange rates, future foreign political and economic developments,
and the possible imposition of exchange controls or other foreign
governmental laws or restrictions applicable to such investments may affect
the U.S. dollar value of such securities, including DRs. Securities prices
in different countries are subject to different economic, financial,
political and social factors. Rates of exchange between the dollar and
other currencies are determined by forces of supply and demand in the
foreign exchange markets. These forces are, in turn, affected by
international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors.
Moreover, individual foreign economies may differ favorably or unfavorably
from the U.S. economy in such respects as growth of gross national product,
rate of inflation, capital reinvestment, resources, self-sufficiency and
balance of payments position. With respect to certain countries, there is
the possibility of expropriation of assets, confiscatory taxation,
political or social instability or diplomatic developments which could
affect the value of investments in those countries. There may be less
publicly available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting, auditing
and financial reporting standards and requirements comparable to those to
which U.S. entities are subject. Certain foreign investments may be subject
to foreign withholding taxes which could affect the value of investment in
these countries. In addition, investment laws in certain foreign countries
may limit or restrict ownership of certain securities by foreign nationals
by restricting or eliminating voting or other rights or limiting the amount
of securities that may be so owned, and such limitations or restrictions
may affect the prices of such securities.
Foreign financial markets, while growing in volume, may have
substantially less volume than U.S. markets, and securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable domestic companies. The foreign markets have different trading
practices that may affect the prices of securities. The foreign markets
have different clearance and settlement procedures, and in certain
countries there have been times when settlements have been unable to keep
pace with the volume of securities transactions, making it difficult to
conduct such transactions. There is generally less government supervision
and regulation of exchanges, brokers and issuers in foreign countries than
there is in the U.S. In addition, the terms and conditions of depositary
facilities may result in less liquidity or lower market values for the DRs
than for the underlying stocks.
AMERICAN DEPOSITARY RECEIPTS AND GLOBAL DEPOSITARY RECEIPTS
Certain of the Portfolio Securities are in the form of either American
Depositary Receipts ("ADRs") or Global Depositary Receipts ("GDRs", which,
together with ADRs, are hereinafter collectively referred to as "DRs"). A
DR is a negotiable receipt which is issued by a depositary, generally a
bank, representing shares (the "Underlying Shares") of a foreign issuer
(the "Foreign Issuer") that have been deposited and are held, on behalf of
the holders of the DRs, at a custodian bank in the Foreign Issuer's home
country. While the market for Underlying Shares will generally be in the
country in which the Foreign Issuer is organized and trading in such market
will generally be based on that country's currency, DRs that are Portfolio
Securities will trade in U.S. Dollars.
Although DRs are distinct securities from the Underlying Shares, the
trading characteristics and valuations of DRs will usually, but not
necessarily, mirror the characteristics and valuations of the Underlying
Shares
5
<PAGE>
represented by the DRs. Active trading volume and efficient pricing in the
principal market in the home country for the Underlying Shares will usually
indicate similar characteristics in respect of the DRs. In the case of
certain DRs, however, there may be inadequate familiarity with or
information about the Foreign Issuer of the Underlying Shares represented
by the DR in the market in which the DR trades to support active volume,
thus resulting in pricing distortions. This is more likely to occur when
the DR is not listed on a U.S. stock exchange or quoted on the National
Market System of the National Association of Securities Dealers Automated
Quotations System ("NASDAQ"), and trades only over-the-counter, because the
Foreign Issuer would not be required to register such DRs under the U.S.
Securities Exchange Act of 1934, as is the case with DRs so listed or
quoted. In addition, because of the size of an offering of Underlying
Shares in DR form outside the home country and/or other factors that have
limited or increased the float of certain DRs, the liquidity of such
securities may be less than or greater than that with respect to the
Underlying Shares. Inasmuch as holders of DRs may surrender the DR in order
to take delivery of and trade the Underlying Shares, a characteristic that
allows investors in DRs to take advantage of price differentials between
different markets, a market for the Underlying Shares that is not liquid
will generally result in an illiquid market for the DR representing such
Underlying Shares.
The depositary bank that issues a DR generally charges a fee, based on
the price of the DR, upon issuance and cancellation of the DR. This fee
would be in addition to the brokerage commissions paid upon the acquisition
or surrender of the security. In addition, the depositary bank incurs
expenses in connection with the conversion of dividends or other cash
distributions paid in local currency into U.S. Dollars and such expenses
are deducted from the amount of the dividend or distribution paid to
holders, resulting in a lower payout per Underlying Share represented by
the DR than would be the case if the Underlying Share were held directly.
Furthermore, foreign investment laws in certain countries may restrict
ownership by foreign nationals of certain classes of Underlying Shares.
Accordingly, the DR representing such class of securities may not possess
voting rights, if any, equivalent to those in respect of the Underlying
Shares. Certain tax considerations, including tax rate differentials,
arising from application of the tax laws of one nation to the nationals of
another and from certain practices in the DR market may also exist with
respect to certain DRs. In varying degrees, any or all of these factors may
affect the value of the DR compared with the value of the Underlying Shares
in the local market.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully
considering the suitability of the Securities in the light of each
investor's particular circumstances.
DESCRIPTION OF SECURITIES
GENERAL
The Securities were issued as a series of Senior Debt Securities under
the Senior Indenture, dated as of April 1, 1983, as amended and restated,
which is more fully described below. The principal amount of each Security
will equal $10 for each $10 price to the public. The Securities will mature
on October 15, 1998.
No periodic payments of interest will be payable with respect to the
Securities. (See "Payment at Maturity", below.)
The Securities are not subject to redemption by the Company or at the
option of any Holder prior to maturity. Upon the occurrence of an Event of
Default with respect to the Securities, Holders of the Securities may
accelerate the maturity of the Securities, as described under "Events of
Default and Acceleration" and "Description of Debt Securities--General--
Events of Default" below.
The Securities were issued in denominations of whole Units.
6
<PAGE>
PAYMENT AT MATURITY
At maturity, a beneficial owner of a Security will be entitled to
receive, with respect to each $10 principal amount of the Security, an
amount equal to the following:
$10 x Closing Portfolio Value
-----------------------
$100
provided, however, that the amount payable at maturity will not be less
than $9 for each $10 principal amount of Securities (the "Minimum
Payment"). Based on the prices of the Portfolio Securities on September 2,
1993, the Multipliers were initially set so that the value of the Portfolio
on September 2, 1993 equaled $100 (the "Original Portfolio Value").
If the Closing Portfolio Value is equal to $90 or less, a beneficial
owner of a Security will receive the Minimum Payment of $9 for each $10
principal amount of the Securities at maturity. If the Closing Portfolio
Value is between $90 and $100, a beneficial owner of a Security will
receive between $9 and $10 for each $10 principal amount of the Securities
at maturity.
The "Closing Portfolio Value" will be determined by Merrill Lynch,
Pierce, Fenner & Smith Incorporated, an affiliate of the Company, or
successor thereto (the "Calculation Agent"), and will equal the sum of the
products of the Average Market Price and the applicable Multiplier for each
Portfolio Security. The "Average Market Price" of a Portfolio Security will
equal the average (mean) of the Market Prices of such Portfolio Security
determined on each of the first thirty Calculation Days with respect to
such Portfolio Security during the Calculation Period. If there are fewer
than thirty Calculation Days with respect to a Portfolio Security, then the
Average Market Price will equal the average (mean) of the Market Prices on
such Calculation Days, and if there is only one Calculation Day, then the
Average Market Price will equal the Market Price on such Calculation Day.
The "Calculation Period" means the period from and including the sixtieth
scheduled NYSE Trading Day prior to the maturity date to and including the
fourth scheduled NYSE Trading Day prior to the maturity date. "Calculation
Day" with respect to a Portfolio Security means any Trading Day during the
Calculation Period in the country in which such Portfolio Security is being
priced on which a Market Disruption Event has not occurred. If a Market
Disruption Event occurs on all Trading Days in such country during the
Calculation Period then the fourth scheduled NYSE Trading Day prior to the
maturity date in such country will be deemed a Calculation Day,
notwithstanding the Market Disruption Event; provided, however, that if
such fourth scheduled NYSE Trading Day is not a Trading Day in such
country, then the immediately preceding Trading Day shall instead be deemed
a Calculation Day. Any reference to a specific day herein shall mean such
calendar day in each market in which Portfolio Securities are priced.
"Market Price" means for a Calculation Day the following:
(i) If the Portfolio Security is listed on a national securities
exchange in the United States, is a NASDAQ National Market System
("NASDAQ NMS") security or is included in the OTC Bulletin Board
Service ("OTC Bulletin Board") operated by the National Association of
Securities Dealers, Inc. (the "NASD"), Market Price means (i) the last
reported sale price, regular way, on such day on the principal United
States securities exchange registered under the Securities Exchange
Act of 1934 on which such Portfolio Security is listed or admitted to
trading, or (ii) if not listed or admitted to trading on any such
securities exchange or if such last reported sale price is not
obtainable, the last reported sale price on the over-the-counter
market as reported on the NASDAQ NMS or OTC Bulletin Board on such
day, or (iii) if the last reported sale price is not available
pursuant to (i) and (ii) above, the mean of the last reported bid and
offer price on the over-the-counter market as reported on the NASDAQ
NMS or OTC Bulletin Board on such day as determined by the Calculation
Agent. If the Portfolio Security is a security issued by a company
organized in the United States and is not listed on a national
securities exchange in the United States, is not a NASDAQ NMS security
or is not included in the OTC Bulletin Board operated by the NASD,
Market Price means the average (mean) of the last available bid and
offer prices
7
<PAGE>
in the United States over-the-counter market of the three dealers
which have the highest volume of transactions in such Portfolio
Security in the immediately preceding calendar month as determined by
the Calculation Agent based on information that is reasonably
available to it. The term "NASDAQ NMS security" shall include a
security included in any successor to such system and the term "OTC
Bulletin Board Service" shall include any successor service thereto.
(ii) If the Portfolio Security is a security issued by a company
organized other than in the United States or is a DR, that, in either
case, is not listed on a national securities exchange in the United
States or is not a NASDAQ NMS security or included in the OTC Bulletin
Board operated by the NASD, Market Price means the last reported sale
price on such day on the securities exchange on which such Portfolio
Security is listed or admitted to trading with the greatest volume of
trading for the calendar month preceding such day as determined by the
Calculation Agent, provided that if such last reported sale price is
for a transaction which occurred more than four hours prior to the
close of such exchange, then the Market Price shall mean the average
(mean) of the last available bid and offer price on such exchange. If
such Portfolio Security is not listed or admitted to trading on any
such securities exchange or if such last reported sale price or bid
and offer are not obtainable, the Market Price shall mean the last
reported sale price on the over-the-counter market with the greatest
volume of trading as determined by the Calculation Agent, provided
that if such last reported sale price is for a transaction which
occurred more than four hours prior to when trading in such over-the-
counter market typically ends, then the Market Price shall mean the
average (mean) of the last available bid and offer prices in such
market of the three dealers which have the highest volume of
transactions in such Portfolio Security in the immediately preceding
calendar month as determined by the Calculation Agent based on
information that is reasonably available to it. If such prices are
quoted in a currency other than in U.S. Dollars, such prices will be
translated into U.S. Dollars for purposes of calculating the Average
Market Price using the Spot Rate on the same calendar day as the date
of any such price. The "Spot Rate" on any date will be determined by
the Calculation Agent and will equal the spot rate of such currency
per U.S. $1.00 on such date at approximately 3:00 p.m., New York City
time, as reported on the information service operated by Bloomberg,
L.P. ("Bloomberg") representing the mean of certain dealers in such
currency or, if Bloomberg has not reported such rate by 3:30 p.m., New
York City time, on such day, the offered spot rate of such currency
per U.S. $1.00 on such date for a transaction amount in an amount
customary for such market on such date quoted at approximately 3:30
p.m., New York City time, by a leading bank in the foreign exchange
markets as may be selected by the Calculation Agent.
If the Calculation Agent is required to use the bid and offer price
for a Portfolio Security to determine the Market Price of such Portfolio
Security pursuant to the foregoing, the Calculation Agent shall not use any
bid or offer price announced by Merrill Lynch, Pierce, Fenner & Smith
Incorporated or any other affiliate of the Company.
As used herein, "NYSE Trading Day" shall mean a day on which trading
is generally conducted in the over-the-counter market for equity securities
in the United States and on the New York Stock Exchange as determined by
the Calculation Agent. "Trading Day" shall mean a day on which trading is
conducted on the principal securities exchanges in the country in which
such Portfolio Security is being priced.
"Market Disruption Event" with respect to a Portfolio Security means
either of the following events, as determined by the Calculation Agent:
(i) the suspension or material limitation (provided that, with
respect to Portfolio Securities that are priced in the United States,
limitations pursuant to New York Stock Exchange Rule 80A (or any
applicable rule or regulation enacted or promulgated by the New York
Stock Exchange, any other self regulatory organization or the
Securities and Exchange Commission of similar scope as determined by
the Calculation Agent) on trading during significant market
8
<PAGE>
fluctuations shall be considered "material" for purposes of this
definition) in the trading of such Portfolio Security in the country
in which such Portfolio Security is being priced for more than two
hours of trading or during the period one-half hour prior to the time
that such Portfolio Security is to be priced, or
(ii) the suspension or material limitation (whether by reason of
movements in price otherwise exceeding levels permitted by the
relevant exchange or otherwise) in option contracts related to a
Portfolio Security traded on any exchange in the country in which such
Portfolio Security is being priced for more than two hours of trading
or during the period one-half hour prior to the time that such
Portfolio Security is to be priced.
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
All determinations made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Company and
beneficial owners of the Securities. All percentages resulting from any
calculation on the Securities will be rounded to the nearest one hundred-
thousandth of a percentage point, with five one millionths of a percentage
point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to
9.87655% (or .0987655)), and all dollar amounts used in or resulting from
such calculation will be rounded to the nearest cent with one-half cent
being rounded upwards.
9
<PAGE>
PORTFOLIO SECURITIES
The stocks or the depositary receipts representing the stocks listed
below will be used to calculate the value of the Portfolio. Holders of the
Securities will not have any right to receive the Portfolio Securities. The
following table sets forth the Portfolio Securities, the percentage of each
Portfolio Security in the Original Portfolio Value and their initial
Multipliers:
<TABLE>
<CAPTION>
% OF PORTFOLIO
VALUE
REPRESENTED IN
ISSUER OF THE COUNTRY IN ORIGINAL INITIAL
PORTFOLIO SECURITY(1) WHICH ORGANIZED ADR/GDR PORTFOLIO VALUE MULTIPLIER
- -------------------------------------------- --------------- ------- --------------- ----------
<S> <C> <C> <C> <C>
Alcatel Alstholm Compagnie Generale
d'Electricite France Yes 4.5455% .1731602
American Telephone & Telegraph Company United States No 4.5455% .0722935
Bell Atlantic Corporation United States No 4.5455% .0711617
BellSouth Corporation United States No 4.5455% .0763942
British Telecommunications plc United Kingdom Yes 4.5455% .0692641
Compania de Telefonos de Chile S.A. Chile Yes 4.5455% .0582751
LM Ericsson Telephone Company Sweden Yes 4.5455% .0988142
GTE Corporation United States No 4.5455% .1249609
Hong Kong Telecommunications, Ltd. Hong Kong Yes 4.5455% .0934798
Newbridge Networks Corporation Canada No 4.5455% .0640205
NYNEX Corporation United States No 4.5455% .0492065
Pacific Telesis Group United States No 4.5455% .0822707
Philippine Long Distance Telephone Company Philippines No 4.5455% .0918274
Rogers Cantel Mobile Communications, Inc. Canada No 4.5455% .1668057
Southwestern Bell Corporation United States No 4.5455% .0999001
Tadiran Ltd. Israel No 4.5455% .1298701
Telecom Corporation of New Zealand Limited New Zealand Yes 4.5455% .1038961
Telecomunicacoes Brasileiras S.A. Brazil Yes 4.5455% .1312767
Telefonica de Argentina Argentina Yes 4.5455% .1033058
Telefonica de Espana Spain Yes 4.5455% .1249609
Telefonos de Mexico, S.A. de C.V. Mexico Yes 4.5455% .0851607
Vodaphone Group plc United Kingdom Yes 4.5455% .0569963
</TABLE>
(1) Or, in the case of DRs, the Underlying Shares.
The initial Multiplier relating to each Portfolio Security indicates
the number of such Portfolio Security, given the market price of such
Portfolio Security as of September 2, 1993, required to be included in the
calculation of the Original Portfolio Value so that each Portfolio Security
represented an equal percentage of the Original Portfolio Value as of
September 2, 1993. The price of each Portfolio Security used to calculate
the initial Multiplier relating to each such Portfolio Security was the
closing price of such Portfolio Security on September 2, 1993. The
respective Multipliers will remain constant for the term of the Securities
unless adjusted for certain corporate events, as described below.
The Portfolio Value, for any day, will equal the sum of the products
of the most recently available Market Prices (determined as described
herein) and the applicable Multipliers for the Portfolio Securities. The
Closing Portfolio Value, however, is calculated based on averaging Market
Prices for certain days.
10
<PAGE>
The Calculation Agent currently intends to publish the Portfolio Value
once on each business day. The Calculation Agent currently calculates and
publishes values of approximately 1,100 specified portfolios. The
Calculation Agent currently provides information concerning such portfolios
to the electronic reporting services operated by Bloomberg, L.P. and to
newspapers and specialized trade publications. If the Calculation Agent
does publish Portfolio Values, the Calculation Agent currently intends to
provide such values to similar sources described above, but there can be no
assurance that such information will ultimately be published by such
sources.
ADJUSTMENTS TO THE MULTIPLIER AND PORTFOLIO
The Multiplier with respect to any Portfolio Security and the
Portfolio will be adjusted as follows:
1. If a Portfolio Security is subject to a stock split or
reverse stock split or similar adjustment in the case of DRs, then
once such split has become effective, the Multiplier relating to such
Portfolio Security will be adjusted to equal the product of the number
of shares issued with respect to one such share of such Portfolio
Security, or the number of receipts issued with respect to one DR if a
Portfolio Security is a DR, and the prior multiplier.
2. If a Portfolio Security is subject to a stock dividend
(issuance of additional shares of the Portfolio Security) that is
given equally to all holders of shares of the issuer of such Portfolio
Security, then once the dividend has become effective and such
Portfolio Security is trading ex-dividend, the Multiplier will be
adjusted so that the new Multiplier shall equal the former Multiplier
plus the product of the number of shares of such Portfolio Security
issued with respect to one such share of Portfolio Security and the
prior multiplier.
3. There will be no adjustments to the Multipliers to reflect
cash dividends or distributions paid with respect of a Portfolio
Security other than for Extraordinary Dividends as described below. A
cash dividend with respect to a Portfolio Security will be deemed to
be an "Extraordinary Dividend" if such dividend exceeds the
immediately preceding non-Extraordinary Dividend for such Portfolio
Security by an amount equal to at least 10% of the Market Price on the
Trading Day preceding the record day for the payment of such
Extraordinary Dividend (the "ex-dividend date"). If an Extraordinary
Dividend occurs with respect to a Portfolio Security, the Multiplier
with respect to such Portfolio Security will be adjusted on the ex-
dividend date with respect to such Extraordinary Dividend so that the
new Multiplier will equal the product of (i) the then current
Multiplier, and (ii) a fraction, the numerator of which is the sum of
the Extraordinary Dividend Amount and the Market Price on the Trading
Day preceding the ex-dividend date, and the denominator of which is
the Market Price on the Trading Day preceding the ex-dividend date.
The "Extraordinary Dividend Amount" with respect to an Extraordinary
Dividend for a Portfolio Security will equal such Extraordinary
Dividend minus the amount of the immediately preceding non-
Extraordinary Dividend for such Portfolio Security.
4. If the issuer of a Portfolio Security is being liquidated or
is subject to a proceeding under any applicable bankruptcy, insolvency
or other similar law such Portfolio Security will continue to be
included in the Portfolio so long as a Market Price for such Portfolio
Security is available. If a Market Price is no longer available for a
Portfolio Security for whatever reason, including the liquidation of
the issuer of such Portfolio Security or the subjection of the issuer
of such Portfolio Security to a proceeding under any applicable
bankruptcy, insolvency or other similar law, then the value of such
Portfolio Security will equal zero in connection with calculating
Portfolio Value and Closing Portfolio Value for so long as no Market
Price is available, and no attempt will be made to find a replacement
stock or increase the value of the Portfolio to compensate for the
deletion of such Portfolio Security.
5. If the issuer of a Portfolio Security or, if a Portfolio
Security is a DR, the Foreign Issuer of the Underlying Share, has been
subject to a merger or consolidation and is not the surviving entity
or is nationalized, then a value for such Portfolio Security will be
determined at the time such issuer is merged or consolidated or
nationalized and will equal the last available Market Price for such
Portfolio Security
11
<PAGE>
and that value will be constant for the remaining term of the
Securities. At such time, no adjustment will be made to the Multiplier
of such Portfolio Security. The Company may at its sole discretion
increase such last available Market Price to reflect payments or
dividends of cash, securities or other consideration to holders of
such Portfolio Security in connection with such a merger or
consolidation which may not be reflected in such last available Market
Price.
6. If the issuer of a Portfolio Security issues to all of its
shareholders equity securities of an issuer other than the issuer of
the Portfolio Security, then such new equity securities will be added
to the Portfolio as a new Portfolio Security. The Multiplier for such
new Portfolio Security will equal the product of the original
Multiplier with respect to the Portfolio Security for which the new
Portfolio Security is being issued (the "Original Portfolio Security")
and the number of shares of the new Portfolio Security issued with
respect to one share of the Original Portfolio Security.
7. If a DR is no longer listed or admitted to trading on a
United States securities exchange registered under the Securities
Exchange Act of 1934, is no longer a NASDAQ NMS security or is no
longer included in the OTC Bulletin Board operated by the NASD, then
the Underlying Share represented by such DR will be deemed to be a new
Portfolio Security. The initial Multiplier for such new Portfolio
Security will equal the last value of the Multiplier for such DR
multiplied by the number of shares of Underlying Shares represented by
a single DR.
No adjustments of any Multiplier of a Portfolio Security will be
required unless such adjustment would require a change of at least 1% in
the Multiplier then in effect. The Multiplier resulting from any of the
adjustments specified above will be rounded to the nearest one thousandth
with five ten-thousandths being rounded upward.
No adjustments to the Multiplier of any Portfolio Security or to the
Portfolio will be made other than those specified above.
12
<PAGE>
HYPOTHETICAL PAYMENTS
The following table illustrates, for a range of hypothetical Closing
Portfolio Values, the amount payable at maturity for each $10 principal
amount of Securities and the pretax annualized rate of return to beneficial
owners of the Securities. AN INVESTMENT IN THE PORTFOLIO SECURITIES WOULD
BE SIGNIFICANTLY DIFFERENT THAN INVESTING IN THE SECURITIES. AMONG OTHER
THINGS, AN INVESTOR IN THE PORTFOLIO SECURITIES MAY REALIZE CERTAIN
DIVIDENDS THAT ARE NOT REFLECTED BY INVESTING IN THE SECURITIES, AND
CURRENCY FLUCTUATIONS MAY SIGNIFICANTLY INCREASE OR DECREASE THE RATE OF
RETURN OF THE PORTFOLIO SECURITIES VERSUS INVESTING IN THE SECURITIES.
<TABLE>
<CAPTION>
ANNUALIZED PAYMENT AT
HYPOTHETICAL PERCENTAGE MATURITY PER PRETAX
CLOSING VALUE PERCENTAGE CHANGE IN THE $10 PRINCIPAL ANNUALIZED RATE
OF THE CHANGE IN THE PORTFOLIO AMOUNT OF OF RETURN AT
PORTFOLIO VALUE PORTFOLIO LEVEL LEVEL(1) SECURITIES MATURITY
- ------------------ --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
0.00 -100.00% -100.00% $ 9.00 -2.05%
10.00 -90.00% -40.29% $ 9.00 -2.05%
20.00 -80.00% -29.10% $ 9.00 -2.05%
30.00 -70.00% -22.20% $ 9.00 -2.05%
40.00 -60.00% -17.13% $ 9.00 -2.05%
50.00 -50.00% -13.10% $ 9.00 -2.05%
60.00 -40.00% -9.74% $ 9.00 -2.05%
70.00 -30.00% -6.85% $ 9.00 -2.05%
80.00 -20.00% -4.31% $ 9.00 -2.05%
90.00 -10.00% -2.05% $ 9.00 -2.05%
100.00 0.00% 0.00% $10.00 0.00%
110.00 10.00% 1.87% $11.00 1.87%
120.00 20.00% 3.60% $12.00 3.60%
130.00 30.00% 5.19% $13.00 5.19%
140.00 40.00% 6.68% $14.00 6.68%
150.00 50.00% 8.08% $15.00 8.08%
160.00 60.00% 9.40% $16.00 9.40%
170.00 70.00% 10.64% $17.00 10.64%
180.00 80.00% 11.82% $18.00 11.82%
190.00 90.00% 12.94% $19.00 12.94%
200.00 100.00% 14.01% $20.00 14.01%
</TABLE>
- ------------------------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis. All returns assume a
maturity of October 15, 1998. The "Annualized Percentage Change in the
Portfolio Level" does not reflect payment of dividends with respect to
the Portfolio Securities or possible effects of foreign exchange rate
fluctuations.
13
<PAGE>
The above figures are for purposes of illustration only. The actual
amount payable at maturity with respect to the Securities will depend
entirely on the actual Closing Portfolio Value.
The investor will not receive their entire principal at maturity
should the market decline in value. The investor will only receive $9.00
for each $10 principal amount of Securities (90% of their original
investment) should the market decline by 10% or more.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a Holder of a Security
upon any acceleration permitted by the Securities will be equal to the
amount payable calculated as though the date of early repayment were the
maturity date of the Securities. See "Description of Securities-Payment at
Maturity" in this Prospectus Supplement. If a bankruptcy proceeding is
commenced in respect of the Company, the claim of the Holder of a Security
may be limited, under Section 502(b)(2) of Title 11 of the United States
Code, to the principal amount of the Security plus an additional amount, if
any, of contingent interest calculated as though the date of the
commencement of the proceeding were the maturity date of the Securities.
In case of default in payment at the maturity date of the Securities
(whether at their stated maturity or upon acceleration), from and after the
maturity date the Securities shall bear interest, payable upon demand of
the Holders thereof, at the rate of 6% per annum (to the extent that
payment of such interest shall be legally enforceable) on the unpaid amount
due and payable on such date in accordance with the terms of the Securities
to the date payment of such amount has been made or duly provided for.
SECURITIES DEPOSITORY
The Securities are represented by one or more fully registered global
securities (the "Global Securities"). Each such Global Security has been
deposited with, or on behalf of, The Depository Trust Company, as
Securities Depository, registered in the name of the Securities Depository
or a nominee thereof. Unless and until it is exchanged in whole or in part
for Securities in definitive form, no Global Security may be transferred
except as a whole by the Securities Depository to a nominee of such
Securities Depository or by a nominee of such Securities Depository to such
Securities Depository or another nominee of such Securities Depository or
by such Securities Depository or any such nominee to a successor of such
Securities Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold securities of its
participants ("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 Securities Depository's Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations.
The Securities Depository is owned by a number of Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the
Securities Depository book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Purchases of Securities must be made by or through Participants, which
will receive a credit on the records of the Securities Depository. The
ownership interest of each actual purchaser of each Security ("Beneficial
Owner") is in turn to be recorded on the Participants' or Indirect
Participants' records. Beneficial Owners will not receive
14
<PAGE>
written confirmation from the Securities Depository of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Participant or Indirect Participant through which the
Beneficial Owner entered into the transaction. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained
by the Securities Depository (with respect to interests of Participants)
and on the records of Participants (with respect to interests of persons
held through Participants). The laws of some states may 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
own, transfer or pledge beneficial interests in Global Securities.
So long as the Securities Depository, or its nominee, is the
registered owner of a Global Security, the Securities Depository or its
nominee, as the case may be, will be considered the sole owner or Holder of
the Securities represented by such Global Security for all purposes under
the Senior Indenture. Except as provided below, Beneficial Owners in a
Global Security will not be entitled to have the Securities represented by
such Global Securities registered in their names, will not receive or be
entitled to receive physical delivery of the Securities in definitive form
and will not be considered the owners or Holders thereof under the Senior
Indenture. Accordingly, each Person owning a beneficial interest in a
Global Security must rely on the procedures of the Securities Depository
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 Senior 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 Security desires to give or take any action which a Holder is
entitled to give or take under the Senior Indenture, the Securities
Depository 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. Conveyance of notices and other communications by the Securities
Depository to Participants, by Participants to Indirect Participants, and
by Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Payment of the principal of, and any additional amount payable at
maturity with respect to, Securities registered in the name of the
Securities Depository or its nominee will be made to the Securities
Depository or its nominee, as the case may be, as the Holder of the Global
Securities representing such Securities. None of the Company, the Trustee
or any other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Securities Depository, upon receipt
of any payment of principal or any additional amount payable at maturity in
respect of a Global Security, will credit the accounts of the Participants
with payment in amounts proportionate to their respective holdings in
principal amount of beneficial interest in such Global Security as shown on
the records of the Securities Depository. The Company also expects that
payments by Participants to Beneficial Owners will be governed by standing
customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered
in "street name", and will be the responsibility of such Participants.
If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not
appointed by the Company within 60 days, (y) the Company executes and
delivers to the Trustee a Company Order to the effect that the Global
Securities shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to the Securities, the Global Securities
will be exchangeable for Securities in definitive form of like tenor and of
an equal aggregate principal amount, in denominations of $10 and integral
multiples thereof. Such definitive Securities shall be registered in such
name or names as the Securities Depository shall instruct the Trustee. It
is expected that such instructions may be based upon directions received by
the Securities Depository from Participants with respect to ownership of
beneficial interests in such Global Securities.
15
<PAGE>
THE PORTFOLIO
GENERAL
While the Portfolio consists of stocks (or DRs representing interests
therein) of issuers that are involved in the global telecommunications
industry, the Portfolio is not intended to provide an indication of the
pattern of price movements of common stocks of corporations involved in the
global telecommunications industry generally. Each of the United States
issuers of a Portfolio Security files certain information reports with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Exchange Act of 1934. Such reports generally contain a description of the
business of the issuer, financial statements and certain other information
which may be material to potential investors in the Securities. Foreign
Issuers of Underlying Shares related to DRs that are Portfolio Securities
and that are traded in the United States also file certain information
reports with the SEC pursuant to the Securities Exchange Act of 1934,
although information contained in such reports will generally be more
limited than that available with respect to a United States issuer. Neither
the Company nor MLPF&S makes any representation or warranty as to the
accuracy or completeness of such reports. THE INCLUSION OF A PORTFOLIO
SECURITY IN THE PORTFOLIO IS NOT A RECOMMENDATION TO BUY OR SELL SUCH
PORTFOLIO SECURITY, AND NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES MAKE
ANY REPRESENTATION TO ANY PURCHASER OF SECURITIES AS TO THE PERFORMANCE OF
THE PORTFOLIO.
The Company or its affiliates may presently or from time to time
engage in business with one or more of the issuers of the Portfolio
Securities or, in the case of DRs, the Underlying Shares, including
extending loans to, or making equity investments in, such issuers or
providing advisory services to such issuers, including merger and
acquisition advisory services. In the course of such business, the Company
or its affiliates may acquire non-public information with respect to such
issuers and, in addition, one or more affiliates of the Company may publish
research reports with respect to such issuers. The Company does not make
any representation to any purchaser of Securities with respect to any
matters whatsoever relating to such issuers. Any prospective purchaser of a
Security should undertake an independent investigation of the issuers of
the Portfolio Securities as in its judgment is appropriate to make an
informed decision with respect to an investment in the Securities.
GLOBAL TELECOMMUNICATIONS SECTOR
The global telecommunications industry is subject to varying degrees
of regulatory, political and economic risk which may affect the price of
the stocks of companies involved in such industry. Such risks depend on a
number of factors including the country in which a company is located.
Telecommunications companies in both developed and emerging countries are
undergoing significant change due to varying and evolving levels of
governmental regulation or deregulation and other factors. As a result,
competitive pressures are intense and the securities of such companies may
be subject to rapid price volatility. In addition, companies offering
telephone services are experiencing increasing competition from cellular
telephones, and the cellular telephone industry, because the industry has a
limited operating history, faces uncertainty concerning the future of the
industry and demand for cellular telephones. All telecommunications
companies in both developed and emerging countries are subject to the
additional risk that technological innovations will make their products and
services obsolete.
In virtually every country, certain aspects of the telecommunications
industry are subject to some government regulation. The nature and scope of
such regulation generally is subject to political forces and market
considerations, the effect of which cannot be predicted. Such regulation
can have significant effects upon the operations of a telecommunications
venture. It is difficult to predict the directions, types or effects of
future telecommunications-related regulation.
During the 1980s and early 1990s, the global telecommunications
industry underwent structural changes. Many state-owned telephone
monopolies were completely or partially divested to the public. American
Telephone & Telegraph divested its local telephone service creating seven
independent regional holding companies in 1984 under an agreement with the
U.S. Government. In addition, the evolution of technology allowed the
entrance of new competitors into the previously exclusive domain of the
traditional telephone operators including operators of cable television
systems. Companies that employ various technologies including fibre-optic,
microwave and satellite
16
<PAGE>
communications are allowed to compete for traditional telephone company
business in many countries. Continued mergers, divestitures, privatizations
and alliances in the global telecommunications industry and changes in
technology will affect companies involved in such industry and the prices
of their stocks.
Among the issuers of the Portfolio Securities, 7 are incorporated in
the United States, 2 in Canada, 2 in the United Kingdom, 1 in France, 1 in
Sweden, 1 in Spain, 1 in Argentina, 1 in Chile, 1 in Brazil, 1 in Mexico, 1
in New Zealand, 1 in Israel, 1 in the Philippines and 1 in Hong Kong.
A potential investor should review the historical prices of the
securities underlying the Portfolio. The historical prices of such
securities should not be taken as an indication of future performance, and
no assurance can be given that the prices of such securities will increase
sufficiently to cause the beneficial owners of the Securities to receive an
amount in excess of the Minimum Payment at the maturity of the Securities.
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities
may from time to time be issued thereunder, without limitation as to
aggregate principal amount, in one or more series and upon such terms as
the Company may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Senior Indenture) on the Voting Stock owned
directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
17
<PAGE>
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with
or into any other corporation, and the Company may sell, lease or convey
all or substantially all of its assets to any corporation, provided that
(i) the corporation (if other than the Company) formed by or resulting from
any such consolidation or merger or which shall have received such assets
shall be a corporation organized and existing under the laws of the United
States of America or a state thereof and shall assume payment of the
principal of (and premium, if any) and interest on the Senior Debt
Securities and the performance and observance of all of the covenants and
conditions of the Senior Indenture to be performed or observed by the
Company, and (ii) the Company or such successor corporation, as the case
may be, shall not immediately thereafter be in default under the Senior
Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose Holders is required to modify or amend the Indenture;
or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Senior Debt Securities necessary to waive any past default to
less than a majority. No modification or amendment of the Subordinated
Indenture or any Subsequent Indenture for Subordinated Debt Securities may
adversely affect the rights of any holder of Senior Indebtedness without
the consent of such Holder. Except with respect to certain fundamental
provisions, the Holders of at least a majority in principal amount of
Outstanding Senior Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default
with respect to Senior Debt Securities of any series: (a) default in the
payment of any interest or Additional Amounts payable on any Senior Debt
Security of that series when due, continued for 30 days; (b) default in the
payment of any principal or premium, if any, on any Senior Debt Security of
that series when due; (c) default in the deposit of any sinking fund
payment, when due, in respect of any Senior Debt Security of that series;
(d) default in the performance of any other covenant of the Company
contained in the Indenture for the benefit of such series or in the Senior
Debt Securities of such series, continued for 60 days after written notice
as provided in the Senior Indenture; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default provided
with respect to Senior Debt Securities of that series. The Trustee or the
Holders of 25% in principal amount of the Outstanding Senior Debt
Securities of
18
<PAGE>
that series may declare the principal amount (or such lesser amount as may
be provided for in the Senior Debt Securities of that series) of all
Outstanding Senior Debt Securities of that series and the interest due
thereon and Additional Amounts payable in respect thereof, if any to be due
and payable immediately if an Event of Default with respect to Senior Debt
Securities of such series shall occur and be continuing at the time of such
declaration. At any time after a declaration of acceleration has been made
with respect to Senior Debt Securities of any series but before a judgment
or decree for payment of money due has been obtained by the Trustee, the
Holders of a majority in principal amount of the Outstanding Senior Debt
Securities of that series may rescind any declaration of acceleration and
its consequences, if all payments due (other than those due as a result of
acceleration) have been made and all Events of Default have been remedied
or waived. Any Event of Default with respect to Senior Debt Securities of
any series may be waived by the Holders of a majority in principal amount
of all Outstanding Senior Debt Securities of that series, except in a case
of failure to pay principal or premium, if any, or interest or Additional
Amounts payable on any Senior Debt Security of that series for which
payment had not been subsequently made or in respect of a covenant or
provision which cannot be modified or amended without the consent of the
Holder of each Outstanding Senior Debt Security of such series affected.
The Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
19
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
CURRENCY PROTECTED NOTES ("CPNS") DUE DECEMBER 31, 1998
----------
On July 7, 1993, Merrill Lynch & Co., Inc. (the "Company") issued
$25,000,000 of Currency Protected Notes ("CPNs") due December 31, 1998 (the
"Notes") in denominations of $1,000 and integral multiples thereof. As of the
date of this Prospectus, $15,000,000 aggregate principal amount of the Notes
remains outstanding. The Notes will mature and be repayable at 100% of the
principal amount thereof on December 31, 1998 (the "Maturity Date"). Interest
payments will be payable with respect to the Notes semiannually on June 30 and
December 31 of each year, as described below ("June Payment Dates" and
"December Payment Dates", respectively and together the "Payment Dates"),
commencing December 31, 1993. The Notes are not subject to redemption by the
Holders or the Company prior to the Maturity Date.
The Company will make interest payments on the Notes on each June and
December Payment Date for the period from and including the last Payment Date
for which interest was paid or the original issue date, as the case may be, to
but excluding such Payment Date (each, an "Interest Period") at a per annum
rate equal to the sum of (i) the Minimum Payment Rate (3%), and (ii) the
Supplemental Payment Rate. The "Supplemental Payment Rate" for an Interest
Period will equal 4.5 multiplied by the difference between 6.15% minus the
Index Rate (as defined below) as of the applicable Determination Date
(generally the seventh scheduled NYSE Business Day prior to the applicable
Payment Date). In no event, however, will the payments on the Notes for any
period be at a rate less than the Minimum Payment Rate. The "Index Rate" will
be the average bankers' acceptance rate in Canadian Dollars for a term of six
months, as more fully described herein (the "Canadian BA Rate").
For information as to the calculation of the amount payable in any calendar
year, see "Description of Notes" in this Prospectus. FOR OTHER INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "SPECIAL CONSIDERATIONS" IN
THIS PROSPECTUS.
Ownership of the Notes will be maintained in book-entry form by or through
the Securities Depository. Beneficial owners of the Notes will not have the
right to receive physical certificates evidencing their ownership except under
the limited circumstances described herein.
The Notes are listed on the New York Stock Exchange under the symbol "MERCN
98".
----------
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
This Prospectus has been prepared in connection with the Notes and is to be
used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), a wholly owned subsidiary of the Company, in connection with offers
and sales related to market-making transactions in the Notes. MLPF&S may act as
principal or agent in such transactions. The Notes may be offered on a national
securities exchange in the event the particular issue of Notes has been listed
on such exchange, or off such exchange in negotiated transactions, or otherwise.
Sales will be made at prices related to prevailing prices at the time of sale.
The distribution of the Notes will conform to the requirements set forth in the
applicable sections of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc.
----------
MERRILL LYNCH & CO.
----------
The date of this Prospectus is , 1995.
<PAGE>
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Notes made hereby nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Notes shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
SPECIAL CONSIDERATIONS
SEMIANNUAL PAYMENTS
If the Index Rate applicable to a Payment Date equals or exceeds 6.15%,
beneficial owners of the Notes will receive only the Minimum Payment Rate
payable with respect to the Notes on such Payment Date, even if the Index
Rate at some point since the preceding Determination Date or issue date, as
the case may be, was less than 6.15%. The interest rate for any Interest
Period generally will be determined seven NYSE Business Days prior to the
end of such Interest Period.
Beneficial owners of the Notes will receive total annual payments on the
Notes at a rate equal to at least the Minimum Payment Rate, and will be
repaid 100% of the principal amount of the Notes at the Maturity Date. The
amount payable on any Payment Date is subject to the conditions described
under "Description of Notes-Semiannual
3
<PAGE>
Payments". A beneficial owner of the Notes may receive payments with
respect to the Notes equal to only the Minimum Payment Rate for each
Interest Period at the times specified herein, and such payments are below
what the Company would pay as interest as of the date hereof if the Company
issued non-callable senior debt securities with a similar maturity as that
of the Notes. The return of principal at the Maturity Date and the payment
of the Minimum Payment Rate with respect to the Notes are not expected to
reflect the full opportunity costs implied by inflation or other factors
relating to the time value of money.
The amount payable on the Notes based on the Index Rate will not produce
the same return as any investment in Canadian bankers' acceptances with
maturities of six months because, among other reasons, interest and
principal payable on the Notes will be in U.S. Dollars while interest and
principal payable on such bankers' acceptances are payable in Canadian
Dollars and the U.S. Dollar value of such Canadian Dollar payments may
increase or decrease depending on the U.S. Dollar/Canadian Dollar exchange
rate. Since the principal and interest payments on the Notes will be made
in U.S. Dollars, such payments will not be subject to changes in Canadian
Dollar/U.S. Dollar exchange rates. Such exchange rate changes may have a
direct effect on the market demand for, and thus the price of, such
bankers' acceptances.
The formula used to determine the interest payable with respect to any
Payment Date contains a multiple which increases the effect of any change
in the applicable Index Rate.
TRADING
The Notes are listed on the New York Stock Exchange under the symbol
"MERCN 98". It is expected that the secondary market for the Notes will be
affected by the creditworthiness of the Company and by a number of other
factors. It is possible to view the Notes as the economic equivalent of a
debt obligation plus a series of cash settlement options; however, there
can be no assurance that the Notes will not trade in the secondary market
at a discount from the aggregate value of such economic components, if such
economic components were valued and capable of being traded separately.
The trading values of the Notes may be affected by a number of
interrelated factors, including those listed below. The following is the
expected effect on the trading value of the Notes of each of the factors
listed below. The following discussion of each separate factor generally
assumes that all other factors are held constant, although the actual
interrelationship between certain of such factors is complex.
Value of the Index Rate. The trading value of the Notes is expected to
depend significantly on the extent to which, if at all, the Index Rate is
less than 6.15%. If, however, Notes are sold at a time when the Index
Rate is less than 6.15%, the sale price may be at a discount from the
amount expected to be payable to the beneficial owner if such price were
to prevail until the next applicable Determination Date. Furthermore, the
price at which a beneficial owner will be able to sell Notes prior to a
Payment Date may be at a discount, which could be substantial, from the
principal amount thereof, if, at such time, the price of the Index Rate
is above, equal to or not sufficiently below 6.15%.
Volatility of the Index Rate. If the volatility of the Index Rate
increases, the trading value of the Notes is expected to increase. If the
volatility of the Index Rate decreases, the trading value of the Notes is
expected to decrease.
Interest Rates. In general, if U.S. interest rates increase, the value of
the Notes is expected to decrease. If U.S. interest rates decrease, the
value of the Notes is generally expected to increase. In addition,
Canadian interest rates will affect the Index Rate. In general, if
Canadian interest rates increase, the Index Rate is expected to increase,
and therefore the value of the Notes is expected to decrease. If Canadian
interest rates decrease, the Index Rate is expected to decrease, and
therefore the value of the Notes is expected to increase.
4
<PAGE>
Time Remaining to Payment Dates. The Notes may trade at a value above
that which may be inferred from the level of interest rates and the Index
Rate. This difference will reflect a "time premium" due to expectations
concerning the value of the Index Rate during the period prior to each
Payment Date. As the time remaining to each Payment Date decreases,
however, this time premium may decrease, thus decreasing the trading
value of the Notes.
Time Remaining to Maturity Date. As the number of remaining Payment Dates
decreases, the value of the remaining rights to receive payments based on
the value of the Index Rate will decrease, thus decreasing the value of
the Notes. Furthermore, as the time to the Maturity Date decreases, the
value of the fixed payments (i.e., the Minimum Annual Payments and the
payment of the principal amount at the maturity of the Notes) is expected
to increase, thus increasing the value of the Notes.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Notes should reach an investment decision only after carefully considering
the suitability of the Notes in the light of their particular
circumstances.
Investors should also consider the tax consequences of investing in the
Notes and should consult their tax advisors.
DESCRIPTION OF NOTES
GENERAL
The Notes were issued as a series of Senior Debt Securities under the
Senior Indenture, dated as of April 1, 1983, as amended and restated, which
is more fully described below. The Notes will mature, and the principal of
the Notes will be repayable at par, on December 31, 1998.
The Notes are not subject to redemption prior to the Maturity Date by the
Company or at the option of any Holder. Upon the occurrence of an Event of
Default with respect to the Notes, however, Holders of the Notes or the
Senior Debt Trustee may accelerate the maturity of the Notes, as described
under "Description of Notes-Events of Default and Acceleration" and "Other
Terms-General-Events of Default" in this Prospectus.
The Notes were issued in denominations of $1,000 and integral multiples
thereof.
SEMIANNUAL PAYMENTS
The Company will make semiannual payments on the Notes each June 30 and
December 31 ("June Payment Dates" and "December Payment Dates",
respectively, and together the "Payment Dates") commencing December 31,
1993, as described below, to the persons in whose names the Notes are
registered on the next preceding June 29 or December 30, except as provided
below. Notwithstanding the foregoing, if it is known three Business Days
prior to December 31 that December 31 will not be a Business Day, the
amount payable by the Company with respect to such December Payment Date
will be made on the Business Day immediately preceding such December 31 to
the persons in whose names the Notes are registered on the second Business
Day immediately preceding such December 31 and the amount so paid will
equal an amount as if interest had accrued through December 31.
The Company will pay interest on the Notes on each June and December
Payment Date for the period since the last Payment Date for which interest
was paid or original issue date, as the case may be, to but excluding such
Payment Date (each, an "Interest Period") at a rate per annum equal to the
sum of (i) the Minimum Payment Rate (3% per annum), and (ii) the
Supplemental Payment Rate. The "Supplemental Payment Rate" for an Interest
Period will equal 4.5 multiplied by the difference between 6.15% minus the
Index Rate as of the Determination Date in
5
<PAGE>
such Interest Period. In no event, however, will the payments on the Notes
for any period be at a rate less than the Minimum Payment Rate. Interest
payable with respect to any Payment Date will be computed on the basis of a
year consisting of 360 days of twelve 30-day months.
State Street Bank and Trust Company will be the calculation agent (the
"Calculation Agent") with respect to the Notes. All determinations made by
the Calculation Agent shall be at the sole discretion of the Calculation
Agent and, absent a determination by the Calculation Agent of a manifest
error, shall be conclusive for all purposes and binding on the Company and
the Holders of the Notes. All percentages resulting from any calculation on
the Notes will be rounded to the nearest one-hundredth of a percentage
point, with five one-thousandth of a percentage point rounded upwards
(e.g., 9.875% (or .09875) would be rounded to 9.88% (or .0988)), and all
dollar amounts used in or resulting from such calculation will be rounded
to the nearest cent with one-half cent being rounded upwards.
If the Index Rate applicable to a Payment Date is equal to or exceeds
6.15%, beneficial owners of the Notes will receive only the Minimum Payment
Rate for the Interest Period preceding such Payment Date, even if the Index
Rate at some point since the preceding Determination Date or the original
issue date, as the case may be, was less than 6.15%.
The following table shows the annual payment rate payable on the Notes
for any Interest Period assuming various Canadian BA Rates on a
Determination Date.
HYPOTHETICAL ANNUAL PAYMENT RATE
<TABLE>
<CAPTION>
HYPOTHETICAL
CANADIAN BA RATE
ON THE HYPOTHETICAL ANNUAL
DETERMINATION DATE PAYMENT RATE
------------------ ------------
<S> <C>
6.15% or greater.................. 3.00%(1)
6.00%............................. 3.68%
5.75%............................. 4.80%
5.50%............................. 5.93%
5.25%............................. 7.05%
5.00%............................. 8.18%
4.75%............................. 9.30%
4.50%............................. 10.43%
4.25%............................. 11.55%
4.00%............................. 12.68%
3.75%............................. 13.80%
3.50%............................. 14.93%
</TABLE>
__________
(1) Minimum Payment Rate of 3% per annum.
A potential investor should review the historical performance of the
Index Rate. The historical performance of the Index Rate should not be
taken as an indication of future performance, and no assurance can be given
that the Index Rate will increase sufficiently to cause the beneficial
owners of the Notes to receive an amount in excess of the principal amount
and the Minimum Payment Rate at the maturity of the Notes or the Minimum
Payment Rate in prior years.
6
<PAGE>
CANADIAN DOLLAR BANKERS' ACCEPTANCE RATE
The "Canadian BA Rate" shall be determined for each Determination Date as
follows:
(i) On the relevant Determination Date, the Canadian BA Rate will be
determined on the basis of the average bankers' acceptance rate in
Canadian Dollars for a term of six months, commencing on the related
Determination Date, which appears on the Reuters Screen Page CDOR (as
defined below), as of 10:00 A.M. New York City time on such Determination
Date or as soon thereafter as rates first appear (but in no event later
than 12:00 P.M. New York City time), as determined by the Calculation
Agent. If no rate appears by 12:00 P.M. New York City time on a
Determination Date with respect to the Canadian bankers' acceptance
rates, then the Canadian BA Rate will be determined as specified in
clause (ii) below. "Reuters Screen Page CDOR" means the displays
designated as Page CDOR on the Reuters Monitor Money Rates Service (or
such other page as may replace Page CDOR on that service for the purpose
of displaying the Canadian Dollar bankers' acceptance rates of major
banks).
(ii) With respect to a Determination Date on which no rate appears on
Reuters Screen Page CDOR as specified in clause (i) above, the
Calculation Agent will request each of four major banks in the Toronto
interbank market, as selected by the Calculation Agent, to provide the
Calculation Agent with its quotation for deposits in Canadian Dollars for
a period of six months commencing on the related Determination Date to
major banks in the Toronto interbank market at approximately 10:00 A.M.
New York City time on such Determination Date and in a principal amount
that is representative for a single transaction in such market at such
time. If at least two such quotations are provided, the Canadian BA Rate
determined on such Determination Date will be the arithmetic mean of such
quotations. If fewer than two banks so selected by the Calculation Agent
are quoting as mentioned in this sentence, the Canadian BA Rate will
equal the average quotation for deposits in Canadian Dollars for a period
of six months commencing on the related Determination Date of major banks
in the Toronto interbank market in a principal amount that is
representative for a single transaction in such market at such time as
determined by the Calculation Agent.
The "Determination Date" means the seventh scheduled NYSE Business Day
prior to the applicable Payment Date as determined by the Calculation
Agent; provided, however, if such day is not a Canadian Business Day, the
Determination Date will be the next succeeding scheduled Canadian Business
Day. "NYSE Business Day" means a day on which the New York Stock Exchange
is open for trading. "Canadian Business Day", as used in this Prospectus
with respect to the Notes, means any day on which commercial banks are open
for business (including dealings in foreign exchange and foreign currency
deposits) in Toronto, Canada. The Calculation Agent will determine which
days are scheduled NYSE Business Days and Canadian Business Days.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Notes shall have occurred
and be continuing, the amount payable to a Holder of a Note upon any
acceleration permitted by the Notes, will equal: (i) the principal amount
thereof, plus (ii) an additional amount calculated as though the date of
early repayment were a Payment Date. If a bankruptcy proceeding is
commenced in respect of the Company, the claim of the Holder of a Note may
be limited, under Section 502(b)(2) of Title 11 of the United States Code,
to the principal amount of the Note plus an additional amount, if any, of
contingent interest calculated as though the date of the commencement of
the proceeding were the maturity date of the Notes.
NOTE DEPOSITORY
Upon issuance, all Notes will be represented by one or more fully
registered global securities (the "Global Securities"). Each such Global
Security will be deposited with, or on behalf of, The Depository Trust
Company, as Securities Depository, registered in the name of the Securities
Depository or a nominee thereof. Unless and until it is exchanged in whole
or in part for Notes in definitive form, no Global Security may be
transferred except as a
7
<PAGE>
whole by the Securities Depository to a nominee of such Securities
Depository or by a nominee of such Securities Depository to such Securities
Depository or another nominee of such Securities Depository or by such
Securities Depository or any such nominee to a successor of such Securities
Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: the
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold securities of its
participants ("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 Securities Depository's Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. The Securities Depository is
owned by a number of Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. The Underwriter (as hereinafter defined) is a
Participant. Access to the Securities Depository book-entry system is also
available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
Purchases of Notes must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each Note ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Participant or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Ownership of beneficial interests in such Global Security will
be shown on, and the transfer of such ownership interests will be effected
only through, records maintained by the Securities Depository (with respect
to interests of Participants) and on the records of Participants (with
respect to interests of persons held through Participants). The laws of
some states may 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 own, transfer or pledge beneficial interests in
Global Securities.
So long as the Securities Depository, or its nominee, is the registered
owner of a Global Security, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the Notes
represented by such Global Security for all purposes under the Senior
Indenture. Except as provided below, Beneficial Owners in a Global Security
will not be entitled to have the Notes represented by such Global
Securities registered in their names, will not receive or be entitled to
receive physical delivery of the Notes in definitive registered form and
will not be considered the owners or Holders thereof under the Senior
Indenture. Accordingly, each Person owning a beneficial interest in a
Global Security must rely on the procedures of the Securities Depository
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 Senior 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 Security desires to give or take any action which a Holder is
entitled to give or take under the Senior Indenture, the Securities
Depository 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. Conveyance of notices and other communications by the Securities
Depository to Participants, by Participants to Indirect Participants, and
by Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Payment of the principal of, and amounts payable on any June Payment Date
or December Payment Date with respect to, Notes registered in the name of
the Securities Depository or its nominee will be made to the Securities
Depository or its nominee, as the case may be, as the Holder of the Global
Securities representing such Notes. None of the Company, the Trustee or any
other agent of the Company or agent of the Trustee will have any
responsibility
8
<PAGE>
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests or for supervising or reviewing
any records relating to such beneficial ownership interests. The Company
expects that the Securities Depository, upon receipt of any payment of
principal or amounts payable on any June Payment Date or December Payment
Date in respect of a Global Security, will credit the accounts of the
Participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interest in such Global Security
as shown on the records of the Securities Depository. The Company also
expects that payments by Participants to Beneficial Owners will be governed
by standing customer instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
Participants.
If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not
appointed by the Company within 60 days, (y) the Company executes and
delivers to the Trustee a Company Order to the effect that the Global
Securities shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to the Notes, the Global Securities will be
exchangeable for Notes in definitive form of like tenor and of an equal
aggregate principal amount, in denominations of $1,000 and integral
multiples thereof. Such definitive Notes shall be registered in such name
or names as the Securities Depository shall instruct the Trustee. It is
expected that such instructions may be based upon directions received by
the Securities Depository from Participants with respect to ownership of
beneficial interests in such Global Securities.
THE CANADIAN BANKERS' ACCEPTANCE RATE
Bankers' acceptances in Canada are a popular method of raising short-term
funding in Canada. Bankers' acceptances represent unconditional written
orders from a borrower instructing a bank to pay a certain amount of money
on a specified future date. Bankers' acceptances are generally issued in
Canadian $100,000 denominations, and are not guaranteed by the Canada
Deposit Corporation.
The market for bankers' acceptances has grown from under 1 billion
Canadian Dollars in early 1975 to approximately 22 billion Canadian Dollars
in 1993 and is among the most liquid short-term securities markets in
Canada.
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities may
from time to time be issued thereunder, without limitation as to aggregate
principal amount, in one or more series and upon such terms as the Company
may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
9
<PAGE>
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Senior Indenture) on the Voting Stock owned
directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all
or substantially all of its assets to any corporation, provided that (i)
the corporation (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received such assets shall
be a corporation organized and existing under the laws of the United States
of America or a state thereof and shall assume payment of the principal of
(and premium, if any) and interest on the Senior Debt Securities and the
performance and observance of all of the covenants and conditions of the
Senior Indenture to be performed or observed by the Company, and (ii) the
Company or such successor corporation, as the case may be, shall not
immediately thereafter be in default under the Senior Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose Holders
10
<PAGE>
is required to modify or amend the Indenture; or (f) modify the foregoing
requirements or reduce the percentage of Outstanding Senior Debt Securities
necessary to waive any past default to less than a majority. No
modification or amendment of the Subordinated Indenture or any Subsequent
Indenture for Subordinated Debt Securities may adversely affect the rights
of any holder of Senior Indebtedness without the consent of such Holder.
Except with respect to certain fundamental provisions, the Holders of at
least a majority in principal amount of Outstanding Senior Debt Securities
of any series may, with respect to such series, waive past defaults under
the Indenture and waive compliance by the Company with certain provisions
thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default with
respect to Senior Debt Securities of any series: (a) default in the payment
of any interest or Additional Amounts payable on any Senior Debt Security
of that series when due, continued for 30 days; (b) default in the payment
of any principal or premium, if any, on any Senior Debt Security of that
series when due; (c) default in the deposit of any sinking fund payment,
when due, in respect of any Senior Debt Security of that series; (d)
default in the performance of any other covenant of the Company contained
in the Indenture for the benefit of such series or in the Senior Debt
Securities of such series, continued for 60 days after written notice as
provided in the Senior Indenture; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default provided
with respect to Senior Debt Securities of that series. The Trustee or the
Holders of 25% in principal amount of the Outstanding Senior Debt
Securities of that series may declare the principal amount (or such lesser
amount as may be provided for in the Senior Debt Securities of that series)
of all Outstanding Senior Debt Securities of that series and the interest
due thereon and Additional Amounts payable in respect thereof, if any to be
due and payable immediately if an Event of Default with respect to Senior
Debt Securities of such series shall occur and be continuing at the time of
such declaration. At any time after a declaration of acceleration has been
made with respect to Senior Debt Securities of any series but before a
judgment or decree for payment of money due has been obtained by the
Trustee, the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those
due as a result of acceleration) have been made and all Events of Default
have been remedied or waived. Any Event of Default with respect to Senior
Debt Securities of any series may be waived by the Holders of a majority in
principal amount of all Outstanding Senior Debt Securities of that series,
except in a case of failure to pay principal or premium, if any, or
interest or Additional Amounts payable on any Senior Debt Security of that
series for which payment had not been subsequently made or in respect of a
covenant or provision which cannot be modified or amended without the
consent of the Holder of each Outstanding Senior Debt Security of such
series affected.
The Holders of a majority in principal amount of the Outstanding Senior
Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a statement as
to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
11
<PAGE>
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
12
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
GLOBAL BOND LINKED SECURITIES/SM/("GLOBLS"/SM/) DUE DECEMBER 31, 1998
CURRENCY PROTECTED NOTES
--------------
On February 22, 1993, Merrill Lynch & Co., Inc. (the "Company") issued
$30,000,000 aggregate principal amount of Global Bond Linked Securities/SM/ due
December 31, 1998 (the "GloBLS" or the "Notes") in denominations of $1,000
and integral multiples thereof. The Notes will mature and be repayable at 100%
of the principal amount thereof on December 31, 1998 (the "Maturity Date").
Payments will be payable with respect to the Notes semiannually on June 30 and
December 31 of each year, as described below ("June Payment Dates" and "December
Payment Dates", respectively), commencing June 30, 1993.
The Company will make interest payments on the Notes each calendar year
at a per annum rate equal to the sum of (i) the Minimum Annual Payment Rate
(3%), and (ii) the Supplemental Annual Payment Rate. The "Supplemental Annual
Payment Rate" will equal the amount, if any, by which the price (expressed as a
percentage) of the Index Bund as of the applicable Determination Date exceeds
100.95% (the "Benchmark Price"). In no event, however, will the payments on the
Notes in any calendar year be at a rate less than the Minimum Annual Payment
Rate. The "Index Bund" will be the 7.125% Bundesanleihe due December 20, 2002
issued by the Federal Republic of Germany on December 29, 1992. If German
interest rates decline, the annual amount payable on the Notes is expected to
increase; if German interest rates increase, the annual amount payable on the
Notes is expected to decrease (although not less than a rate equal to the
Minimum Annual Payment Rate). For each $1,000 principal amount of Notes, the
Company will pay $15 of the total amount payable for each calendar year on the
June Payment Date and will pay the balance of the annual amount due on the Notes
for such year on the December Payment Date. The amount payable on the Notes in
1993 will be prorated as described herein. The Notes are not subject to
redemption by the Holders or the Company prior to the Maturity Date.
For information as to the calculation of the amount payable in any
calendar year see "Description of Notes" in this Prospectus. FOR OTHER
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "SPECIAL
CONSIDERATIONS" IN THIS PROSPECTUS.
Ownership of the Notes will be maintained in book-entry form by or
through the Securities Depository. Beneficial owners of the Notes will not have
the right to receive physical certificates evidencing their ownership except
under the limited circumstances described herein.
The Notes are listed on the New York Stock Exchange under the symbol "MER
DM".
--------------
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
This Prospectus has been prepared in connection with the Notes and is to be used
by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S"), a wholly owned subsidiary of the Company, in connection with offers
and sales related to market-making transactions in the Notes. MLPF&S may act as
principal or agent in such transactions. The Notes may be offered on a national
securities exchange in the event the particular issue of Notes has been listed
on such exchange, or off such exchange in negotiated transactions, or otherwise.
Sales will be made at prices related to prevailing prices at the time of sale.
The distribution of the Notes will conform to the requirements set forth in the
applicable sections of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc.
--------------
MERRILL LYNCH & CO.
--------------
THE DATE OF THIS PROSPECTUS IS , 1995.
/SM/"GloBLS" and "Global Bond Linked Securities" are service marks of Merrill
Lynch & Co., Inc.
<PAGE>
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Notes made hereby nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Notes shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
SPECIAL CONSIDERATIONS
SEMIANNUAL PAYMENTS
If the Index Bund Price applicable to a December Payment Date does not
exceed the Benchmark Price, beneficial owners of the Notes will receive
payments only at the Minimum Annual Payment Rate payable with respect to
the Notes, even if the price of the Index Bund at some point since the
preceding Determination Date or issue date, as the case may be, exceeded
the Benchmark Price.
Beneficial owners will receive total annual payments on the Notes at a
rate equal to at least the Minimum Annual Payment Rate, and will be repaid
100% of the principal amount of the Notes at the Maturity Date. The amount
payable on any December Payment Date is subject to the conditions described
under "Description of Notes-Semiannual Payments". A beneficial owner of the
Notes may receive payments with respect to the Notes at
3
<PAGE>
a rate equal to only the Minimum Annual Payment Rate for each year at the
times specified herein, and such payments are below what the Company would
pay as interest as of the date hereof if the Company issued non-callable
senior debt securities with a similar maturity as that of the Notes. The
return of principal at the Maturity Date and the payment at a rate equal to
the Minimum Annual Payment Rate with respect to the Notes are not expected
to reflect the full opportunity costs implied by inflation or other factors
relating to the time value of money.
The amount payable on the Notes based on the Index Bund will not
produce the same return as if the Index Bund was purchased and held for a
similar period because of the following: (i) the Index Bund Price will not
reflect any interest payable on the Index Bund, (ii) interest and principal
payable on the Notes will be in U.S. Dollars while interest and principal
payable on the Index Bund is payable in Deutsche Marks and the U.S. Dollar
value of such Deutsche Mark payments may increase or decrease depending on
the U.S. Dollar/Deutsche Mark exchange rate, and (iii) the annual interest
rate on the Index Bund is higher than the Minimum Annual Payment Rate.
Unlike a direct investment in the Index Bund, the principal and
interest payments on the Notes will be made in U.S. Dollars, and as such,
the U.S. Dollar value of such payments will not be subject to changes in
Deutsche Mark/U.S. Dollar exchange rates. Such exchange rate changes may
have a direct effect on the market demand for, and thus the price of, the
Index Bund.
The Indenture provides that the Indenture and the Notes will be
governed by and construed in accordance with the laws of the State of New
York. Under present New York law the maximum rate of interest is 25% per
annum on a simple interest basis. This limit may not apply to notes in
which $2,500,000 or more has been invested. While the Company believes that
New York law would be given effect by a state or Federal court sitting
outside of New York, state laws frequently regulate the amount of interest
that may be charged to and paid by a borrower (including, in some cases,
corporate borrowers). All payments under the Notes (other than the return
of principal) could be considered interest for the purpose of state usury
laws. The Company has covenanted for the benefit of the Holders of the
Notes, to the extent permitted by law, not to claim voluntarily the
benefits of any laws concerning usurious rates of interest against a Holder
of the Notes.
TRADING
The Notes are listed on the New York Stock Exchange under the symbol
"MER DM". It is expected that the secondary market for the Notes will be
affected by the creditworthiness of the Company and by a number of other
factors. It is possible to view the Notes as the economic equivalent of a
debt obligation plus a series of cash settlement options; however, there
can be no assurance that the Notes will not trade in the secondary market
at a discount from the aggregate value of such economic components, if such
economic components were valued and capable of being traded separately.
The trading values of the Notes may be affected by a number of
interrelated factors, including those listed below. The following is the
expected effect on the trading value of the Notes of each of the factors
listed below. The following discussion of each separate factor generally
assumes that all other factors are held constant, although the actual
interrelationship between certain of such factors is complex.
Price of the Index Bund. The trading value of the Notes is
expected to depend significantly on the extent to which, if at all,
the price of the Index Bund exceeds the Benchmark Price. If, however,
Notes are sold at a time when the price of the Index Bund exceeds the
Benchmark Price, the sale price may be at a discount from the amount
expected to be payable to the beneficial owner if such price were to
prevail until the next applicable Determination Date. Furthermore, the
price at which a beneficial owner will be able to sell Notes prior to
a December Payment Date may be at a discount, which could be
substantial, from the principal amount thereof, if, at such time, the
price of the Index Bund is below, equal to or not sufficiently above
the Benchmark Price.
4
<PAGE>
Volatility of the Price of the Index Bund. If the volatility of
the price of the Index Bund increases, the trading value of the Notes
is expected to increase. If the volatility of the price of the Index
Bund decreases, the trading value of the Notes is expected to
decrease.
Interest Rates. In general, if U.S. interest rates increase, the
value of the Notes is expected to decrease. If U.S. interest rates
decrease, the value of the Notes is generally expected to increase. In
addition, German interest rates will affect the price of the Index
Bund. In general, if German interest rates increase, the Index Bund
price, and therefore the value of the Notes, is expected to decrease.
If German interest rates decrease, the Index Bund price, and therefore
the value of the Notes, is expected to increase.
Time Remaining to December Payment Dates. The Notes may trade at
a value above that which may be inferred from the level of interest
rates and the price of the Index Bund. This difference will reflect a
"time premium" due to expectations concerning the price of the Index
Bund during the period prior to each December Payment Date. As the
time remaining to each December Payment Date decreases, however, this
time premium may decrease, thus decreasing the trading value of the
Notes.
Time Remaining to Maturity. As the number of remaining December
Payment Dates decreases, the value of the remaining rights to receive
payments based on the price of the Index Bund in excess of the Minimum
Annual Payment Rate will decrease, thus decreasing the value of the
Notes. Furthermore, as the time to the Maturity Date decreases, the
value of the fixed payments (i.e., payments at the Minimum Annual
Payment Rate and the payment of the principal amount at the maturity
of the Notes) is expected to increase, thus increasing the value of
the Notes. In addition, as the time to maturity decreases, the
remaining term to maturity of the Index Bund will decrease. In
general, a given change in German interest rates will generally affect
German debt instruments with shorter maturities less than those with
longer maturities.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Notes should reach an investment decision only after carefully considering
the suitability of the Notes in the light of their particular
circumstances.
Investors should also consider the tax consequences of investing in
the Notes and should consult their tax advisors.
DESCRIPTION OF NOTES
GENERAL
The Notes were issued as a series of Senior Debt Securities under the
Senior Indenture, dated as of April 1, 1983, as amended and restated, which
is more fully described below. The Notes will mature, and the principal of
the Notes will be repayable at par, on December 31, 1998.
The Notes are not subject to redemption prior to the Maturity Date by the
Company or at the option of any Holder. Upon the occurrence of an Event of
Default with respect to the Notes, however, Holders of the Notes or the
Senior Debt Trustee may accelerate the maturity of the Notes, as described
under "Description of Notes-Events of Default and Acceleration" and "Other
Terms-Events of Default" in this Prospectus.
The Notes were issued in denominations of $1,000 and integral multiples
thereof.
5
<PAGE>
SEMIANNUAL PAYMENTS
The Company will make semiannual payments on the Notes each June 30 and
December 31 ("June Payment Dates" and "December Payment Dates",
respectively) commencing June 30, 1993, as described below, to the persons
in whose names the Notes are registered on the next preceding June 29 or
December 30, except as provided below. Notwithstanding the foregoing, if it
is known three Business Days prior to December 31 that December 31 will not
be a Business Day, the amount payable by the Company with respect to such
December Payment Date will be made on the Business Day immediately
preceding such December 31 to the persons in whose names the Notes are
registered on the second Business Day immediately preceding such December
31 and the amount so paid will equal an amount as if interest had accrued
through December 31.
For each calendar year, the Company will pay interest on the Notes at a
rate per annum equal to the sum of (i) the Minimum Annual Payment Rate
(3%), and (ii) the Supplemental Annual Payment Rate. The "Supplemental
Annual Payment Rate" equals the amount, if any, by which the price
(expressed as a percentage) of the Index Bund, determined as described
below (the "Index Bund Price"), as of the applicable Determination Date
exceeds 100.95% (the "Benchmark Price") as determined by the Calculation
Agent. In no event, however, will the payments on the Notes in any calendar
year be at a rate less than the Minimum Annual Payment Rate. For each
$1,000 principal amount of the Notes, the Company will pay $15 of the total
amount payable for each calendar year on the June Payment Date, and will
pay the balance of the annual interest amount due on the Notes for such
year on the December Payment Date. The amount payable on the June Payment
Date in 1993 will equal $15 per $1,000 principal amount prorated based on
the ratio of the number of days from and including the original issuance
date of the Notes to but excluding such June Payment Date, computed on the
basis of a year consisting of 360 days of twelve 30-day months, divided by
180. The amount payable on the December Payment Date in 1993 will be at a
rate equal to the Minimum Annual Payment Rate applied to the period from
the June Payment Date to the December Payment Date ($15 per $1,000
principal amount) plus the Supplemental Annual Payment Rate calculated as
described above prorated by 309/360 (the ratio of the number of days from
and including the original issuance date of the Notes to and including
December 31, 1993, computed on the basis of a year consisting of 360 days
of twelve 30-day months, divided by 360).
State Street Bank and Trust Company will be the calculation agent (the
"Calculation Agent") with respect to the Notes. All determinations made by
the Calculation Agent shall be at the sole discretion of the Calculation
Agent and, in the absence of manifest error, shall be conclusive for all
purposes and binding on the Company and the Holders of the Notes. All
percentages resulting from any calculation on the Notes will be rounded to
the nearest one hundred-thousandth of a percentage point, with five one
millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all dollar
amounts used in or resulting from such calculation will be rounded to the
nearest cent (with one-half cent being rounded upwards).
If the Index Bund Price applicable to a December Payment Date does not
exceed the Benchmark Price, Holders of the Notes will receive payments
which reflect only the Minimum Annual Payment Rate payable with respect to
the Notes for the calendar year containing such December Payment Date, even
if the price of the Index Bund at some point since the preceding
Determination Date or issue date, as the case may be, exceeded the
Benchmark Price.
6
<PAGE>
The following table shows the total pretax annual payment rate on the
Notes in any year assuming various Index Bund Prices for the Index Bund on
any Determination Date and the Benchmark Price of 100.95%.
HYPOTHETICAL GLOBLS TOTAL ANNUAL PAYMENT RATE
<TABLE>
<CAPTION>
HYPOTHETICAL INDEX HYPOTHETICAL TOTAL ANNUAL
BUND PRICE ON THE BENCHMARK GLOBLS PAYMENT
DETERMINATION DATE PRICE RATE (1)
-------------------------- ------------------ -------------------------
<S> <C> <C>
less than 100.95% 100.95% 3.00%(2)
100.95% 100.95% 3.00%(2)
101.95% 100.95% 4.00%
102.95% 100.95% 5.00%
103.95% 100.95% 6.00%
104.95% 100.95% 7.00%
105.95% 100.95% 8.00%
106.95% 100.95% 9.00%
107.95% 100.95% 10.00%
108.95% 100.95% 11.00%
109.95% 100.95% 12.00%
110.95% 100.95% 13.00%
111.95% 100.95% 14.00%
112.95% 100.95% 15.00%
113.95% 100.95% 16.00%
</TABLE>
- -------------
(1) The payments due on the Notes in 1993 will be prorated based on the
number of days the Notes were issued and outstanding during 1993, as
discussed more fully herein.
(2) Minimum Annual Payment Rate of 3% per annum ($30 per $1,000 principal
amount of Notes).
INDEX BUND PRICE
The Index Bund Price is the arithmetic mean of the bid prices, expressed
as a percentage of the principal amount, as of 9:30 A.M. New York City time
on the applicable Determination Date, of three leading dealers in
Bundesanleihen selected by the Calculation Agent. The "Determination Date"
means the seventh scheduled NYSE Business Day prior to the applicable
December Payment Date. If three such bid prices are not available on such
seventh scheduled NYSE Business Day, the Determination Date will be the
sixth scheduled NYSE Business Day preceding the applicable December Payment
Date. If the Calculation Agent cannot obtain three bid prices from leading
dealers for Bundesanleihen on the sixth scheduled NYSE Business Day
preceding the applicable December Payment Date, then the Index Bund Price
will equal the official price expressed as a percentage reported by the
Frankfurt Stock Exchange for the Index Bund as a result of the official
price fixing on the Frankfurt Stock Exchange on such sixth scheduled NYSE
Business Day preceding the applicable December Payment Date. If no official
price is fixed on the Frankfurt Stock Exchange on such sixth scheduled NYSE
Business Day, then the Index Bund Price will equal the bid price determined
by the Calculation Agent on such sixth scheduled NYSE Business Day based on
then current market conditions, including the last price at which the Index
Bund was offered or sold. The bid prices solicited by the Calculation Agent
will be for an amount that is representative of a single transaction in the
market at the applicable time and will not include accrued but unpaid
interest on the Index Bund. "NYSE Business Day" means a day on which the
New York Stock Exchange is open for trading and the Calculation Agent will
determine which days are scheduled NYSE Business Days.
7
<PAGE>
HYPOTHETICAL PAYMENTS
The following table shows the approximate required yield-to-maturity of
the Index Bund on each anticipated Determination Date in order to generate
various total pretax annual payment rates for the Notes in each year
assuming the Benchmark Price of 100.95%. The table contained under "The
German Bond Market and the Index Bund" sets forth historical yields-to-
maturity of German government bonds with specified maturities since 1977.
Yields on the Index Bund are expressed on an annual yield-to-maturity
basis. The yields-to-maturity and total pretax annual payment rates shown
below are for illustrative purposes only and are not intended to predict
either the future price levels of the Index Bund or actual payments on the
Notes.
ANNUAL DETERMINATION DATES
<TABLE>
<CAPTION>
TOTAL PRETAX
ANNUAL
PAYMENT RATE(1)(3) 1993(2) 1994 1995 1996 1997 1998
- ------------------ ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
3.00% 6.98% 6.97% 6.95% 6.92% 6.89% 6.84%
4.00% 6.83% 6.80% 6.76% 6.72% 6.65% 6.55%
5.00% 6.68% 6.64% 6.58% 6.51% 6.41% 6.26%
6.00% 6.53% 6.47% 6.41% 6.31% 6.18% 5.98%
7.00% 6.38% 6.32% 6.23% 6.11% 5.95% 5.70%
8.00% 6.24% 6.16% 6.05% 5.91% 5.72% 5.42%
9.00% 6.10% 6.00% 5.88% 5.72% 5.49% 5.15%
10.00% 5.96% 5.85% 5.71% 5.53% 5.27% 4.87%
11.00% 5.82% 5.70% 5.54% 5.34% 5.04% 4.61%
12.00% 5.68% 5.55% 5.38% 5.15% 4.83% 4.34%
13.00% 5.54% 5.40% 5.21% 4.96% 4.61% 4.08%
14.00% 5.41% 5.25% 5.05% 4.78% 4.40% 3.82%
15.00% 5.28% 5.11% 4.89% 4.60% 4.19% 3.57%
16.00% 5.15% 4.96% 4.73% 4.42% 3.98% 3.32%
---- ---- ---- ---- ---- ----
</TABLE>
(1) Total pretax annual payment rate includes the Minimum Annual Payment Rate
plus the Supplemental Annual Payment Rate in each year.
(2) Payments on the Notes for 1993 will be prorated as discussed
herein.
(3) As of February 12, 1993, the yield-to-maturity on German government bonds
with approximate maturities indicated below were approximately the
following:
<TABLE>
<CAPTION>
CORRESPONDING
APPROXIMATE DETERMINATION YIELD TO
MATURITY DATE MATURITY
----------- ------------- ---------
<S> <C> <C>
9 years December 1993 7.01%
8 years December 1994 6.94%
7 years December 1995 6.91%
6 years December 1996 6.63%
5 years December 1997 6.61%
4 years December 1998 6.66%
</TABLE>
A potential investor should review the historical performance of the
Index Bund. The historical performance of the Index Bund should not be
taken as an indication of future performance, and no assurance can be given
that the Index Bund will increase sufficiently to cause the beneficial
owners of the Notes to receive an amount in excess of principal and the
Minimum Annual Payment Rate at the maturity of the Notes or the Minimum
Annual Payment Rate in any prior year.
8
<PAGE>
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Notes shall have
occurred and be continuing, the amount payable to a Holder of a Note upon
any acceleration permitted by the Notes, will equal: (i) the principal
amount thereof, plus (ii) an additional amount calculated as though the
date of early repayment were a December Payment Date and prorated through
such date of early repayment in the same manner as the amount payable on
the December 1993 payment date was prorated. If a bankruptcy proceeding is
commenced in respect of the Company, the claim of the Holder of a Note may
be limited, under Section 502(b)(2) of Title 11 of the United States Code,
to the principal amount of the Note plus an additional amount, if any, of
contingent interest calculated as though the date of the commencement of
the proceeding were the maturity date of the Notes.
NOTE DEPOSITORY
Upon issuance, all Notes will be represented by one or more fully
registered global securities (the "Global Securities"). Each such Global
Security will be deposited with, or on behalf of, The Depository Trust
Company, as Securities Depository, registered in the name of the Securities
Depository or a nominee thereof. Unless and until it is exchanged in whole
or in part for Securities in definitive form, no Global Security may be
transferred except as a whole by the Securities Depository to a nominee of
such Securities Depository or by a nominee of such Securities Depository to
such Securities Depository or another nominee of such Securities Depository
or by such Securities Depository or any such nominee to a successor of such
Securities Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold securities of its
participants ("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 Securities Depository's Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. The Securities Depository is
owned by a number of Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. The Underwriter (as hereinafter defined) is a
Participant. Access to the Securities Depository book-entry system is also
available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
Purchases of Notes must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each Note ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Participant or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Ownership of beneficial interests in such Global Security will
be shown on, and the transfer of such ownership interests will be effected
only through, records maintained by the Securities Depository (with respect
to interests of Participants) and on the records of Participants (with
respect to interests of persons held through Participants). The laws of
some states may 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 own, transfer or pledge beneficial interests in
Global Securities.
So long as the Securities Depository, or its nominee, is the registered
owner of a Global Security, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the Notes
represented by such Global Security for all purposes under the Senior
Indenture. Except as provided below, Beneficial Owners in a Global Security
will not be entitled to have the Notes represented by such Global
Securities registered in their names, will not receive or be entitled to
receive physical delivery of the Notes in definitive registered form and
will
9
<PAGE>
not be considered the owners or Holders thereof under the Senior Indenture.
Accordingly, each Person owning a beneficial interest in a Global Security
must rely on the procedures of the Securities Depository 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 Senior 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 Security
desires to give or take any action which a Holder is entitled to give or
take under the Senior Indenture, the Securities Depository 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. Conveyance of notices and
other communications by the Securities Depository to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Payment of the principal of, and amounts payable on any June Payment Date
or December Payment Date with respect to, Notes registered in the name of
the Securities Depository or its nominee will be made to the Securities
Depository or its nominee, as the case may be, as the Holder of the Global
Securities representing such Notes. None of the Company, the Trustee or any
other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Securities Depository, upon receipt
of any payment of principal or amounts payable on any June Payment Date or
December Payment Date in respect of a Global Security, will credit the
accounts of the Participants with payment in amounts proportionate to their
respective holdings in principal amount of beneficial interest in such
Global Security as shown on the records of the Securities Depository. The
Company also expects that payments by Participants to Beneficial Owners
will be governed by standing customer instructions and customary practices,
as is now the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility
of such Participants.
If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not
appointed by the Company within 60 days, (y) the Company executes and
delivers to the Trustee a Company Order to the effect that the Global
Securities shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to the Notes, the Global Securities will be
exchangeable for Notes in definitive form of like tenor and of an equal
aggregate principal amount, in denominations of $1,000 and integral
multiples thereof. Such definitive Notes shall be registered in such name
or names as the Securities Depository shall instruct the Trustee. It is
expected that such instructions may be based upon directions received by
the Securities Depository from Participants with respect to ownership of
beneficial interests in such Global Securities.
THE GERMAN BOND MARKET AND THE INDEX BUND
The Deutsche Mark-denominated fixed income market is the third largest in
the world, exceeded in size only by those of the U.S. Dollar and Japanese
Yen. As of the end of September 1992, the total nominal amount of Deutsche
Mark-denominated fixed income debt outstanding was over DM 1.889 trillion
(or U.S. $1.18 trillion assuming an exchange rate of DM/U.S. $1.60)
(Source: Bundesbank). Bundesanleihen ("Bunds") are debt securities issued
by the Federal Republic of Germany and are backed by its full faith and
credit. Bunds account for approximately 75% of the debt of the Federal
Republic of Germany and approximately 30% of all fixed income debt
denominated in Deutsche Marks as of the end of September 1992.
Bundesanleihen are principally traded in the over-the-counter market in
Germany and are also listed on eight exchanges in Germany, including the
Frankfurt Exchange.
The Index Bund was originally issued on December 29, 1992 and is not
redeemable prior to its stated maturity. Because the Index Bund had a
maturity of ten years when it was originally issued, the time remaining to
such
10
<PAGE>
maturity will necessarily decline over time. As the time remaining to
maturity declines on the Index Bund, the Index Bund price will be affected.
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities may
from time to time be issued thereunder, without limitation as to aggregate
principal amount, in one or more series and upon such terms as the Company
may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Senior Indenture) on the Voting Stock owned
directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
11
<PAGE>
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all
or substantially all of its assets to any corporation, provided that (i)
the corporation (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received such assets shall
be a corporation organized and existing under the laws of the United States
of America or a state thereof and shall assume payment of the principal of
(and premium, if any) and interest on the Senior Debt Securities and the
performance and observance of all of the covenants and conditions of the
Senior Indenture to be performed or observed by the Company, and (ii) the
Company or such successor corporation, as the case may be, shall not
immediately thereafter be in default under the Senior Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose Holders is required to modify or amend the Indenture;
or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Senior Debt Securities necessary to waive any past default to
less than a majority. No modification or amendment of the Subordinated
Indenture or any Subsequent Indenture for Subordinated Debt Securities may
adversely affect the rights of any holder of Senior Indebtedness without
the consent of such Holder. Except with respect to certain fundamental
provisions, the Holders of at least a majority in principal amount of
Outstanding Senior Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default with
respect to Senior Debt Securities of any series: (a) default in the payment
of any interest or Additional Amounts payable on any Senior Debt Security
of that series when due, continued for 30 days; (b) default in the payment
of any principal or premium, if any, on any Senior Debt Security of that
series when due; (c) default in the deposit of any sinking fund payment,
when due, in respect of any Senior Debt Security of that series; (d)
default in the performance of any other covenant of the Company contained
in the Indenture for the benefit of such series or in the Senior Debt
Securities of such series, continued for 60 days after written notice as
provided in the Senior Indenture; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default provided
with respect to Senior Debt Securities of that series. The Trustee or the
Holders of 25% in principal amount of the Outstanding Senior Debt
Securities of that series may declare the principal amount (or such lesser
amount as may be provided for in the Senior Debt Securities of that series)
of all Outstanding Senior Debt Securities of that series and the interest
due thereon and Additional Amounts payable in respect thereof, if any to be
due and payable immediately if an Event of Default with respect to Senior
Debt Securities of such series shall occur and be continuing at the time of
such declaration. At any time after a declaration of acceleration has been
made with respect to Senior Debt Securities of any series but before a
judgment or decree for payment of money due has been obtained by the
Trustee, the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those
due as a result of acceleration) have been made and all Events of Default
have been remedied or waived. Any Event of Default with respect to Senior
Debt Securities of
12
<PAGE>
any series may be waived by the Holders of a majority in principal amount
of all Outstanding Senior Debt Securities of that series, except in a case
of failure to pay principal or premium, if any, or interest or Additional
Amounts payable on any Senior Debt Security of that series for which
payment had not been subsequently made or in respect of a covenant or
provision which cannot be modified or amended without the consent of the
Holder of each Outstanding Senior Debt Security of such series affected.
The Holders of a majority in principal amount of the Outstanding Senior
Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a statement as
to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
13
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
EQUITY PARTICIPATION SECURITIES WITH MINIMUM RETURN PROTECTION DUE JUNE 30, 1999
_______________
On June 28, 1993, Merrill Lynch & Co., Inc. (the "Company") issued
$355,000,000 aggregate principal amount of Equity Participation Securities with
Minimum Return Protection due June 30, 1999 (the "Securities", or the "Notes").
As of the date of this Prospectus, $245,000,000 aggregate principal amount of
the Securities remains outstanding. The Securities were issued in denominations
of $1,000 and integral multiples thereof, bear no periodic payments of interest
and will mature on June 30, 1999. At maturity, a beneficial owner of a Security
will be entitled to receive, with respect to each Security, the principal amount
thereof plus an interest payment (the "Supplemental Redemption Amount") based on
the percentage increase, if any, in the S&P 500 Composite Stock Price Index (the
"S&P 500 Index"). The Securities are to be issued as a series of Senior Debt
Securities under the Senior Indenture described herein. The Securities are not
redeemable prior to maturity.
The Supplemental Redemption Amount payable with respect to a Security at
maturity will equal the product of (A) the principal amount of the applicable
Security, (B) the percentage change from 447.43, the closing value of the S&P
500 Index on June 16, 1993, as compared to the Final Average Value, and (C)
128%. In no event, however, will the Supplemental Redemption Amount be less than
$200 per $1,000 principal amount of the Securities (the "Minimum Supplemental
Redemption Amount"), representing a minimum annualized rate of return of 3.06%.
The calculation of the Final Average Value, as more fully described herein, will
equal the arithmetic average of the closing values of the S&P 500 Index on
certain days during June of 1997, 1998 and 1999.
For information as to the calculation of the Supplemental Redemption
Amount which will be paid at maturity, the calculation and the composition of
the S&P 500 Index, see "Description of Securities" and "The Standard & Poor's
500 Index" in this Prospectus. FOR OTHER INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS, SEE "SPECIAL CONSIDERATIONS" IN THIS PROSPECTUS.
Ownership of the Securities will be maintained in book-entry form by or
through the Depository. Beneficial owners of the Securities will not have the
right to receive physical certificates evidencing their ownership except under
the limited circumstances described herein.
The Securities have been listed on the New York Stock Exchange under the
symbol "MERP ZR99".
_____________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus may be used by the Underwriter in connection with offers
and sales related to market-making transactions in the Securities. The
Underwriter may act as principal or agent in such transactions. Such sales will
be made at prices related to prevailing market prices at the time of sale. The
distribution of the Securities will conform to the requirements set forth in the
applicable sections of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc.
_______________
MERRILL LYNCH & CO.
_______________
The date of this Prospectus is , 1995.
<PAGE>
STANDARD & POOR'S CORPORATION ("S&P") DOES NOT GUARANTEE THE ACCURACY
AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.
S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY
THE COMPANY, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, HOLDERS OF
THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED
UNDER THE LICENSE AGREEMENT DESCRIBED HEREIN OR FOR ANY OTHER USE. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
_______________
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Securities made hereby nor has
the Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Securities shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
Investors should be aware that if the Final Average Value of the S&P
500 Index does not exceed the Initial Value by more than approximately
15.63%, beneficial owners of the Securities will receive only the principal
amount thereof and the Minimum Supplemental Redemption Amount. A beneficial
owner of the Securities may receive a Supplemental Redemption Amount equal
only to the Minimum Supplemental Redemption Amount at maturity, and such
Minimum Supplemental Redemption Amount is below what the Company would pay
as interest as of the date hereof if the Company issued non-callable senior
debt securities with a similar maturity as that of the Securities. The
3
<PAGE>
return of principal of the Securities at maturity and the payment of the
Minimum Supplemental Redemption Amount are not expected to reflect the full
opportunity costs implied by inflation or other factors relating to the
time value of money.
The S&P 500 Index does not reflect the payment of dividends on the
stocks underlying it and therefore, in addition to the considerations
regarding averaging discussed below, the yield based on the S&P 500 Index
to the maturity of the Securities will not produce the same yield as if
such underlying stocks were purchased and held for a similar period. See
"Special Considerations" in this Prospectus.
Because the Final Average Value will be based upon average values of
the S&P 500 Index during specified periods in three successive years, a
significant increase in the S&P 500 Index as measured by the average values
during the specified period in the final year, or in either earlier year,
may be substantially or entirely offset by the average values of the S&P
500 Index during the specified periods in the other two years.
TRADING
The Securities have been listed on the New York Stock Exchange under
the symbol "MERP ZR99". There can be no assurances as to how the Securities
will trade in the secondary market or whether such market will be liquid.
It is expected that the secondary market for the Securities will be
affected by the creditworthiness of the Company and by a number of other
factors. Because the Final Average Value is an average of the three
Calculation Values as described below, the price at which a beneficial
owner of a Security will be able to sell such Security in the secondary
market may be at a discount if the first or second such Calculation Value
is below the Initial Value.
The trading value of the Securities is expected to depend primarily on
the extent of the appreciation, if any, of the S&P 500 Index over the
Initial Value. If, however, Securities are sold prior to the maturity date
at a time when the S&P 500 Index exceeds the Initial Value, the sale price
may be at a discount from the amount expected to be payable to the
beneficial owner if such excess of the S&P 500 Index over the Initial Value
were to prevail until maturity of the Securities because of the possible
fluctuation of the S&P 500 Index between the time of such sale and the
maturity date and the effect of the value of the S&P 500 Index on prior
days used to calculate the Final Average Value, if any. Furthermore, the
price at which a beneficial owner will be able to sell Securities prior to
maturity may be at a discount, which could be substantial, from the
principal amount thereof, if, at such time, the S&P 500 Index is below,
equal to or not sufficiently above the Initial Value and/or if the value of
the S&P 500 Index on prior days used to calculate the Final Average Value,
if any, was below, equal to or not sufficiently above the Initial Value. A
discount could also result from rising interest rates.
The trading values of the Securities may be affected by a number of
interrelated factors, including the creditworthiness of the Company and
those factors listed below. The relationship among these factors is
complex, including how these factors affect the relative value of the
principal amount of the Securities to be repaid at maturity and the value
of the Supplemental Redemption Amount. Accordingly, investors should be
aware that factors other than the level of the S&P 500 Index are likely to
affect the Securities' trading value. The expected theorized effect on the
trading value of the Securities of each of the factors listed below,
assuming in each case that all other factors are held constant, is as
follows:
Interest Rates. In general, if U.S. interest rates increase, the
value of the Securities is expected to decrease. If U.S. interest
rates decrease, the value of the Securities is expected to increase.
Interest rates may also affect the U.S. economy, and, in turn, the
value of the S&P 500 Index. Rising interest rates may lower the value
of the S&P 500 Index and, thus, the Securities. Falling interest rates
may increase the value of the S&P 500 Index and, thus, may increase
the value of the Securities.
Volatility of the S&P 500 Index. If the volatility of the S&P 500
Index increases, the trading value of the Securities is expected to
increase. If the volatility of the S&P 500 Index decreases, the
trading value of the Securities is expected to decrease.
Time Remaining to Maturity. The Securities may trade at a value
above that which may be inferred from the level of interest rates and
the S&P 500 Index. This difference will reflect a "time premium" due
to expectations concerning the value of the S&P 500 Index during the
period prior to maturity of the Securities. As the time remaining to
maturity of the Securities decreases, however, this time premium is
4
<PAGE>
expected to decrease, thus decreasing the trading value of the
Securities. In addition, the price at which a beneficial owner may be
able to sell Securities prior to maturity may be at a discount, which
may be substantial, from the minimum expected value at maturity if one
or more Calculation Values, as defined below, were below, equal to or
not sufficiently above the Initial Value.
Dividend Rates in the United States. If dividend rates on the
stocks comprising the S&P 500 Index increase, the value of the
Securities is expected to decrease. Conversely, if dividend rates on
the stocks comprising the S&P 500 Index decrease, the value of the
Securities is expected to increase. However, in general, rising U.S.
corporate dividend rates may increase the value of the S&P 500 Index
and, in turn, increase the value of the Securities. Conversely,
falling U.S. dividend rates may decrease the value of the S&P 500
Index and, in turn, decrease the value of the Securities.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully
considering the suitability of the Securities in light of their particular
circumstances.
Investors should also consider the tax consequences of investing in
the Securities and should consult their tax advisors.
5
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The Securities were issued as a series of Senior Debt Securities under
the Senior Indenture, dated as of April 1, 1983, as amended and restated,
which is more fully described under "Other Terms" in this Prospectus. The
Securities will mature on June 30, 1999.
No periodic payments of interest will be payable with respect to the
Securities. (See "Payment at Maturity", below.)
The Securities are not subject to redemption by the Company or at the
option of any beneficial owner prior to maturity. Upon the occurrence of an
Event of Default with respect to the Securities, beneficial owners of the
Securities may accelerate the maturity of the Securities, as described
under "Description of Securities--Events of Default and Acceleration" and
"Other Terms--Events of Default" in this Prospectus.
The Securities are transferable in denominations of $1,000 and
integral multiples thereof.
PAYMENT AT MATURITY
At maturity, a beneficial owner of a Security will be entitled to
receive the principal amount thereof plus a Supplemental Redemption Amount,
all as provided below. If the Final Average Value of the S&P 500 Index does
not exceed the Initial Value by more than approximately 15.63%, a
beneficial owner of a Security will be entitled to receive only the
principal amount thereof and the Minimum Supplemental Redemption Amount.
At maturity, a beneficial owner of a Security will be entitled to
receive, with respect to each such Security, (i) the principal amount
thereof, and (ii) the Supplemental Redemption Amount equal in amount to:
Final Average Value-Initial Value
Principal Amount x --------------------------------- x 128%
Initial Value
provided, that the Supplemental Redemption Amount will not be less than the
Minimum Supplemental Redemption Amount of $200 per $1,000 principal amount
of Securities. The Initial Value equals 447.43, the closing value of the
S&P 500 Index on June 16, 1993.
The Final Average Value of the S&P 500 Index will be determined by
State Street Bank and Trust Company (the "Calculation Agent") and will
equal the arithmetic average (mean) of the Yearly Values, as defined below,
for 1997, 1998 and 1999. The Yearly Value for any year will be calculated
during the Calculation Period for such year which will be from and
including June 18 in 1997, June 18 in 1998 and June 17 in 1999 to and
including the fifth scheduled Business Day after such date. The Yearly
Value for each year will equal the arithmetic average (mean) of the closing
values of the S&P 500 Index on the first day in the applicable Calculation
Period (provided that a Market Disruption Event, as defined below, shall
not have occurred on such day) and on each succeeding Business Day
(provided that a Market Disruption Event shall not have occurred on the
applicable day) up to and including the last Business Day in the applicable
Calculation Period (each, a "Calculation Date") until the Calculation Agent
has so determined such closing values for five Business Days. If a Market
Disruption Event occurs on two or more of the Business Days during a
Calculation Period, the Yearly Value for the relevant year will equal the
average of the values on Business Days on which a Market Disruption Event
did not occur during such Calculation Period or, if there is only one such
Business Day, the value on such day. If Market Disruption Events occur on
all of such Business Days during a Calculation Period, the Yearly Value for
the relevant year shall equal the closing value of the S&P 500 Index on the
last Business Day of the Calculation Period regardless of whether a Market
Disruption Event shall have occurred on such day.
For purposes of determining the Final Average Value, a "Business Day"
is a day on which The New York Stock Exchange is open for trading. All
determinations made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, absent a determination by the
Calculation Agent of a manifest error, shall be conclusive for all purposes
and binding on the Company and beneficial owners of the Securities.
6
<PAGE>
If S&P discontinues publication of the S&P 500 Index and S&P or
another entity publishes a successor or substitute index that the
Calculation Agent determines, in its sole discretion, to be comparable to
the S&P 500 Index (any such index being referred to hereinafter as a
"Successor Index"), then, upon the Calculation Agent's notification of such
determination to the Trustee and the Company, the Calculation Agent will
substitute the Successor Index as calculated by S&P or such other entity
for the S&P 500 Index and calculate the Final Average Value as described in
the preceding paragraph. Upon any selection by the Calculation Agent of a
Successor Index, the Company shall cause notice thereof to be published in
The Wall Street Journal (or another newspaper of general circulation)
within three Business Days of such selection.
If S&P discontinues publication of the S&P 500 Index and a Successor
Index is not selected by the Calculation Agent or is no longer published on
any of the Calculation Dates, the value to be substituted for the S&P 500
Index for any such Calculation Date used to calculate the Supplemental
Redemption Amount at maturity will be calculated as described below under
"Discontinuance of the S&P 500 Index."
If a Successor Index is selected or the Calculation Agent calculates a
value as a substitute for the S&P 500 Index as described below, such
Successor Index or value shall be substituted for the S&P 500 Index for all
purposes, including for purposes of determining whether a Market Disruption
Event exists.
If at any time the method of calculating the S&P 500 Index, or the
value thereof, is changed in a material respect, or if the S&P 500 Index is
in any other way modified so that such Index does not, in the opinion of
the Calculation Agent, fairly represent the value of the S&P 500 Index had
such changes or modifications not been made, then, from and after such
time, the Calculation Agent shall, at the close of business in New York,
New York, on each date that the closing value with respect to the Final
Average Value is to be calculated, make such adjustments as, in the good
faith judgment of the Calculation Agent, may be necessary in order to
arrive at a calculation of a value of a stock index comparable to the S&P
500 Index as if such changes or modifications had not been made, and
calculate such closing value with reference to the S&P 500 Index, as
adjusted. Accordingly, if the method of calculating the S&P 500 Index is
modified so that the value of such Index is a fraction or a multiple of
what it would have been if it had not been modified (e.g., due to a split
in the Index), then the Calculation Agent shall adjust such Index in order
to arrive at a value of the S&P 500 Index as if it had not been modified
(e.g., as if such split had not occurred).
"Market Disruption Event" means either of the following events, as
determined by the Calculation Agent:
(i) the suspension or material limitation (limitations pursuant to
New York Stock Exchange Rule 80A (or any applicable rule or regulation
enacted or promulgated by the New York Stock Exchange, any other self
regulatory organization or the Securities and Exchange Commission of
similar scope as determined by the Calculation Agent) on trading
during significant market fluctuations shall be considered "material"
for purposes of this definition), in each case, for more than two
hours of trading in 100 or more of the securities included in the S&P
500 Index, or
(ii) the suspension or material limitation, in each case, for more
than two hours of trading (whether by reason of movements in price
otherwise exceeding levels permitted by the relevant exchange or
otherwise) in (A) futures contracts related to the S&P 500 Index which
are traded on the Chicago Mercantile Exchange or (B) option contracts
related to the S&P 500 Index which are traded on the Chicago Board
Options Exchange, Inc.
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
7
<PAGE>
The following table illustrates, for a range of hypothetical Final
Average Values, (i) the total amount payable at maturity for each $1,000
principal amount of Securities, (ii) the pretax annualized rate of return
to beneficial owners of Securities, and (iii) the pretax annualized rate of
return of an investment in the stocks underlying the S&P 500 (which
includes an assumed aggregate dividend yield of 2.8% per annum, as more
fully described below).
<TABLE>
<CAPTION>
TOTAL PRETAX PRETAX ANNUALIZED
HYPOTHETICAL FINAL PERCENTAGE CHANGE AMOUNT ANNUALIZED RATE OF RATE OF RETURN OF
AVERAGE VALUE OF OVER INITIAL PAYABLE AT RETURN ON THE STOCKS UNDERLYING
THE S&P 500 INDEX VALUE MATURITY SECURITIES(1) S&P 500(1)(2)
- ------------------- ----------------- ---------- ------------------ -----------------
<S> <C> <C> <C> <C>
223.72 -50% $1,200 3.06% -8.47%
268.46 -40% $1,200 3.06% -5.58%
313.20 -30% $1,200 3.06% -3.10%
357.94 -20% $1,200 3.06% -0.92%
402.69 -10% $1,200 3.06% 1.04%
447.43(3) 0% $1,200 3.06% 2.81%
492.17 10% $1,200 3.06% 4.43%
536.92 20% $1,256 3.83% 5.92%
581.66 30% $1,384 5.49% 7.31%
626.40 40% $1,512 7.00% 8.60%
671.15 50% $1,640 8.41% 9.82%
715.89 60% $1,768 9.72% 10.97%
760.63 70% $1,896 10.94% 12.05%
805.37 80% $2,024 12.09% 13.08%
850.12 90% $2,152 13.18% 14.06%
894.86 100% $2,280 14.21% 14.99%
939.60 110% $2,408 15.18% 15.89%
984.35 120% $2,536 16.11% 16.74%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes (i) an investment of a fixed amount in the
stocks underlying the S&P 500 Index with the allocation of such amount
reflecting the relative weights of such stocks in the S&P 500 Index;
(ii) a percentage change in the aggregate price of such stocks that
equals the percentage change in the S&P 500 Index from the Initial
Value to the relevant Final Average Value; (iii) a constant dividend
yield of 2.8% per annum, paid quarterly from the date of initial
delivery of Securities, applied to the value of the S&P 500 Index at
the end of each such quarter assuming such value increases or
decreases linearly from 440 to the applicable hypothetical Final
Average Value; (iv) no transaction fees or expenses; (v) a six year
maturity for the Securities from the date of issuance; and (vi) a
final S&P 500 Index value equal to the Final Average Value. The
aggregate dividend yield of the stocks underlying the S&P 500 Index as
of June 16, 1993 was approximately 2.8%.
(3) This value is the Initial Value.
The above figures are for purposes of illustration only. The actual Total
Redemption Amount received by investors and the pretax annualized rate of
return resulting therefrom will depend entirely on the actual Final Average
Value determined by the Calculation Agent as provided herein. Because the
Final Average Value will be based upon average values of the S&P 500 Index
during specified periods in three successive years, a significant increase
or decrease in the S&P 500 Index as measured by the average values during
the specified period in any year may be substantially or entirely offset by
the average values of the S&P 500 Index during the specified periods in the
other two years.
The Indenture provides that the Indenture and the Securities will be
governed by and construed in accordance with the laws of the state of New
York. Under present New York law, the maximum rate of interest is 25% per
annum on a simple interest basis. This limit may not apply to Securities in
which $2,500,000 or more has been invested. While the Company believes that
New York law would be given effect by a state or federal court sitting
outside of New York, state laws frequently regulate the amount of interest
that may be charged to and paid by a borrower (including, in some cases,
corporate borrowers). It is suggested that prospective investors consult
their personal advisors with respect to the applicability of such laws. The
Company has covenanted for the benefit of the beneficial owners of the
Securities, to the extent permitted by law, not to claim voluntarily the
benefits of any laws concerning usurious rates of interest against a
beneficial owner of the Securities.
8
<PAGE>
DISCONTINUANCE OF THE S&P 500 INDEX AND SUCCESSOR INDEX
If S&P discontinues publication of the S&P 500 Index and a Successor
Index is available, then the amount payable at maturity or upon earlier
acceleration will be determined by reference to the Successor Index, as
provided above.
If the publication of the S&P 500 Index is discontinued and S&P or
another entity does not publish a Successor Index on any of the Calculation
Dates, the value to be substituted for the S&P 500 Index for any such
Calculation Date used to calculate the Supplemental Redemption Amount at
maturity will be the value computed by the Calculation Agent for each such
Calculation Date in accordance with the following procedures:
(1) identifying the component stocks of the S&P 500 Index or any
Successor Index as of the last date on which either of such indices was
calculated by S&P or another entity and published by S&P or such other
entity (each such component stock is a "Last Component Stock");
(2) for each Last Component Stock, calculating as of each such
Calculation Date the product of the market price per share and the number
of the then outstanding shares (such product referred to as the "Market
Value" of such stock), by reference to (a) the closing market price per
share of such Last Component Stock as quoted by the New York Stock Exchange
or the American Stock Exchange or any other registered national securities
exchange that is the primary market for such Last Component Stock, or if no
such quotation is available, then the closing market price as quoted by any
other registered national securities exchange or the National Association
of Securities Dealers Automated Quotation National Market System
("NASDAQ"), or if no such price is quoted, then the market price from the
best available source as determined by the Calculation Agent (collectively,
the "Exchanges") and (b) the most recent publicly available statement of
the number of outstanding shares of such Last Component Stock;
(3) aggregating the Market Values obtained in clause (2) for all Last
Component Stocks;
(4) ascertaining the Base Value (as defined below under "The Standard &
Poor's 500 Index--Computation of the Index") in effect as of the last day
on which either the S&P 500 Index or any Successor Index was published by
S&P or another entity, adjusted as described below;
(5) dividing the aggregate Market Value of all Last Component Stocks by
the Base Value (adjusted as aforesaid);
(6) multiplying the resulting quotient (expressed in decimals) by ten.
If any Last Component Stock is no longer publicly traded on any
registered national securities exchange or in the over-the-counter market,
the last available market price per share for such Last Component Stock as
quoted by any registered national securities exchange or in the over-the-
counter market, and the number of outstanding shares thereof at such time,
will be used in computing the last available Market Value of such Last
Component Stock. Such Market Value will be used in all computations of the
S&P 500 Index thereafter.
If a company that has issued a Last Component Stock and another company
that has issued a Last Component Stock are consolidated to form a new
company, the common stock of such new company will be considered a Last
Component Stock and the common stocks of the constituent companies will no
longer be considered Last Component Stocks. If any company that has issued
a Last Component Stock merges with, or acquires, a company that has not
issued a Last Component Stock, the common stock of the surviving
corporation will, upon the effectiveness of such merger or acquisition, be
considered a Last Component Stock. In each such case, the Base Value will
be adjusted so that the Base Value immediately after such consolidation,
merger or acquisition will equal (a) the Base Value immediately prior to
such event, multiplied by (b) the quotient of the aggregate Market Value of
all Last Component Stocks immediately after such event, divided by the
aggregate Market Value for all Last Component Stocks immediately prior to
such event.
If a company that has issued a Last Component Stock issues a stock
dividend, declares a stock split or issues new shares pursuant to the
acquisition of another company, then, in each case, the Base Value will be
adjusted (in accordance with the formula described below) so that the Base
Value immediately after the time the particular Last
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Component Stock commences trading ex-dividend, the effectiveness of the
stock split or the time new shares of such Last Component Stock commence
trading equals (a) the Base Value immediately prior to such event,
multiplied by (b) the quotient of the aggregate Market Value for all Last
Component Stocks immediately after such event, divided by the aggregate
Market Value of all Last Component Stocks immediately prior to such event.
The Base Value used by the Calculation Agent to calculate the value
described above will not necessarily be adjusted in all cases in which S&P,
in its discretion, might adjust the Base Value (as described below under
"The Standard & Poor's 500 Index--Computation of the S&P 500 Index").
If S&P discontinues publication of the S&P 500 Index prior to the period
during which the Supplemental Redemption Amount is to be determined and the
Calculation Agent determines that no Successor Index is available at such
time, then on each Business Day until the earlier to occur of (i) the
determination of the Final Average Value and (ii) a determination by the
Calculation Agent that a Successor Index is available, the Calculation
Agent shall determine the value that would be used in computing the
Supplemental Redemption Amount by reference to the method set forth in
clauses (1) through (6) in the fourth preceding paragraph above as if such
day were a Calculation Date. The Calculation Agent will cause notice of
each such value to be published not less often than once each month in The
Wall Street Journal (or another newspaper of general circulation), and
arrange for information with respect to such values to be made available by
telephone. Notwithstanding these alternative arrangements, discontinuance
of the publication of the S&P 500 Index may adversely affect trading in the
Securities.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a beneficial owner of a
Security upon any acceleration permitted by the Securities, with respect to
each $1,000 principal amount thereof, will be equal to: (i) the initial
issue price ($1,000), plus (ii) an additional amount of contingent interest
calculated as though the date of early repayment were the maturity date of
the Securities. The Calculation Period used to calculate the final Yearly
Value of the Notes so accelerated will begin on the eighth scheduled
Business Day next preceding the scheduled date for such early redemption.
If such final Yearly Value is the only Yearly Value which shall have been
calculated with respect to the Notes, such final Yearly Value will be the
Final Average Value. If one or two other Yearly Values shall have been
calculated with respect to the Notes for prior years when the Notes shall
have been outstanding, the average of the final Yearly Value and such one
other Yearly Value or such two other Yearly Values, as the case may be,
will be the Final Average Value. The Minimum Supplemental Redemption Amount
with respect to any such early redemption date will be an amount equal to
the interest which would have accrued on the Securities from and including
the date of original issuance to but excluding the date of early redemption
at an annualized rate of 3.06%, calculated on a semiannual bond equivalent
basis. See "Description of Securities--Payment at Maturity" in this
Prospectus. If a bankruptcy proceeding is commenced in respect of the
Company, the claim of the beneficial owner of a Security may be limited,
under Section 502(b)(2) of Title 11 of the United States Code, to the
principal amount of the Security plus an additional amount of contingent
interest calculated as though the date of the commencement of the
proceeding were the maturity date of the Securities.
In case of default in payment at the maturity date of the Securities
(whether at their stated maturity or upon acceleration), from and after the
maturity date the Securities shall bear interest, payable upon demand of
the beneficial owners thereof, at the rate of 7% per annum (to the extent
that payment of such interest shall be legally enforceable) on the unpaid
amount due and payable on such date in accordance with the terms of the
Securities to the date payment of such amount has been made or duly
provided for.
DEPOSITORY
The Securities are represented by three fully registered global
securities (the "Global Securities"). Each such Global Security has been
deposited with, or on behalf of, The Depository Trust Company ("DTC"), as
Depository, registered in the name of DTC or a nominee thereof. Unless and
until it is exchanged in whole or in part for Securities in definitive
form, no Global Security may be transferred except as a whole by the
Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository or by
such Depository or any such nominee to a successor of such Depository or a
nominee of such successor.
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DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the Banking Law 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
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities of its participants
("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.
DTC's Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations.
DTC is owned by a number of Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC book-entry system
is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Purchases of Securities must be made by or through Participants, which
will receive a credit on the records of DTC. The ownership interest of each
actual purchaser of each Security ("Beneficial Owner") is in turn to be
recorded on the Participants' or Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase,
but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of
their holdings, from the Participant or Indirect Participant through which
the Beneficial Owner entered into the transaction. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained
by DTC (with respect to interests of Participants) and on the records of
Participants (with respect to interests of persons held through
Participants). The laws of some states may 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 own, transfer or pledge
beneficial interests in Global Securities.
So long as DTC, or its nominee, is the registered owner of a Global
Security, DTC or its nominee, as the case may be, will be considered the
sole owner or Holder of the Securities represented by such Global Security
for all purposes under the Senior Indenture. Except as provided below,
Beneficial Owners in a Global Security will not be entitled to have the
Securities represented by such Global Securities registered in their names,
will not receive or be entitled to receive physical delivery of the
Securities in definitive form and will not be considered the owners or
Holders thereof under the Senior Indenture. Accordingly, each Person owning
a beneficial interest in a Global Security must rely on the procedures of
DTC 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 Senior 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 Security desires to give or take any action which a Holder is
entitled to give or take under the Senior Indenture, DTC 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. Conveyance of notices and
other communications by DTC to Participants, by Participants to Indirect
Participants, and by Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of the principal of, and any Supplemental Redemption Amount with
respect to, Securities registered in the name of DTC or its nominee will be
made to DTC or its nominee, as the case may be, as the Holder of the Global
Securities representing such Securities. None of the Company, the Trustee
or any other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that DTC, upon receipt of any payment of
principal or any Supplemental Redemption Amount in respect of a Global
Security, will credit the accounts of the Participants with payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interest in such Global Security as shown on the records of DTC.
The Company also expects that payments by Participants to Beneficial Owners
will be governed by standing customer instructions and customary practices,
as is now the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility
of such Participants.
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If (x) any Depository is at any time unwilling or unable to continue as
Depository and a successor depository is not appointed by the Company
within 60 days, (y) the Company executes and delivers to the Trustee a
Company Order to the effect that the Global Securities shall be
exchangeable or (z) an Event of Default has occurred and is continuing with
respect to the Securities, the Global Securities will be exchangeable for
Securities in definitive form of like tenor and of an equal aggregate
principal amount, in denominations of $1,000 and integral multiples
thereof. Such definitive Securities shall be registered in such name or
names as the Depository shall instruct the Trustee. It is expected that
such instructions may be based upon directions received by the Depository
from Participants with respect to ownership of beneficial interests in such
Global Securities.
THE STANDARD & POOR'S 500 INDEX
All disclosure contained in this Prospectus regarding the S&P 500 Index,
including, without limitation, its make-up, method of calculation and
changes in its components, was derived from publicly available information
prepared by S&P as of May 28, 1993. Neither the Company nor the Underwriter
takes any responsibility for the accuracy or completeness of such
information.
GENERAL
The S&P 500 Index is published by S&P and is intended to provide an
indication of the pattern of common stock price movement. The calculation
of the value of the S&P 500 Index (discussed below in further detail) is
based on the relative value of the aggregate Market Value (as defined
above) of the common stocks of 500 companies as of a particular time as
compared to the aggregate average Market Value of the common stocks of 500
similar companies during the base period of the years 1941 through 1943. As
of May 28, 1993, the 500 companies included in the S&P 500 Index
represented approximately 75% of the aggregate Market Value of common
stocks traded on The New York Stock Exchange; however, the 500 companies
are not the 500 largest companies listed on The New York Stock Exchange and
not all 500 companies are listed on such exchange. As of May 28, 1993, the
aggregate market value of the 500 companies included in the S&P 500 Index
represented approximately 70% of the aggregate market value of United
States domestic, public companies. S&P chooses companies for inclusion in
the S&P 500 Index with the aim of achieving a distribution by broad
industry groupings that approximates the distribution of these groupings in
the common stock population of The New York Stock Exchange, which S&P uses
as an assumed model for the composition of the total market. Relevant
criteria employed by S&P include the viability of the particular company,
the extent to which that company represents the industry group to which it
is assigned, the extent to which the market price of that company's common
stock is generally responsive to changes in the affairs of the respective
industry and the Market Value and trading activity of the common stock of
that company. As of May 28, 1993, the 500 companies included in the Index
were divided into 88 individual groups. These individual groups comprised
the following four main groups of companies (with the number of companies
currently included in each group indicated in parentheses): Industrials
(384), Utilities (46), Transportation (15) and Financial (55). S&P may from
time to time, in its sole discretion, add companies to, or delete companies
from, the S&P 500 Index to achieve the objectives stated above.
COMPUTATION OF THE S&P 500 INDEX
S&P currently computes the S&P 500 Index as of a particular time as
follows:
(1) the Market Value of each component stock is determined as of
such time;
(2) the Market Value of all component stocks as of such time (as
determined under clause (1) above) are aggregated;
(3) the mean average of the Market Values as of each week in the
base period of the years 1941 through 1943 of the common stock of each
company in a group of 500 substantially similar companies is
determined;
(4) the mean average Market Values of all such common stocks over
such base period (as determined under clause (3) above) are aggregated
(such aggregate amount being referred to as the "Base Value");
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(5) the aggregate Market Value of all component stocks as of such
time (as determined under clause (2) above) is divided by the Base
Value; and
(6) the resulting quotient (expressed in decimals) is multiplied by
ten.
While S&P currently employs the above methodology to calculate the S&P 500
Index, no assurance can be given that S&P will not modify or change such
methodology in a manner that may affect the Supplemental Redemption Amount
payable to beneficial owners of Securities upon maturity or otherwise.
S&P adjusts the foregoing formula to negate the effect of changes in
the Market Value of a component stock that are determined by S&P to be
arbitrary or not due to true market fluctuations. Such changes may result
from such causes as the issuance of stock dividends, the granting to
shareholders of rights to purchase additional shares of such stock, the
purchase thereof by employees pursuant to employee benefit plans, certain
consolidations and acquisitions, the granting to shareholders of rights to
purchase other securities of the company, the substitution by S&P of
particular component stocks in the S&P 500 Index, and other reasons. In all
such cases, S&P first recalculates the aggregate Market Value of all
component stocks (after taking account of the new market price per share of
the particular component stock or the new number of outstanding shares
thereof or both, as the case may be) and then determines the New Base Value
in accordance with the following formula:
Old Base Value x New Market Value = New Base Value
----------------
Old Market Value
The result is that the Base Value is adjusted in proportion to any change
in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of
such causes upon the S&P 500 Index.
A potential investor should review the historical performance of the
Index. The historical performance of the Index should not be taken as an
indication of future performance, and no assurance can be given that the
Index will increase sufficiently to cause the beneficial owners of the
Securities to receive an amount in excess of the principal amount plus the
Minimum Supplemental Redemption Amount at the maturity of the Securities.
LICENSE AGREEMENT
S&P and Merrill Lynch Capital Services, Inc. have entered into a non-
exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
owned and published by S&P in connection with certain securities, including
the Securities, and the Company is an authorized sublicensee thereof.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this
Prospectus:
"The Securities are not sponsored, endorsed, sold or promoted by S&P.
S&P makes no representation or warranty, express or implied, to the
Holders of the Securities or any member of the public regarding the
advisability of investing in securities generally or in the Securities
particularly or the ability of the S&P 500 Index to track general
stock market performance. S&P's only relationship to Merrill Lynch
Capital Services, Inc. and the Company (other than transactions
entered into in the ordinary course of business) is the licensing of
certain servicemarks and trade names of S&P and of the S&P 500 Index
which is determined, composed and calculated by S&P without regard to
the Company or the Securities. S&P has no obligation to take the needs
of the Company or the Holders of the Securities into consideration in
determining, composing or calculating the S&P 500 Index. S&P is not
responsible for and has not participated in the determination of the
timing of the sale of the Securities, prices at which the Securities
are to initially be sold, or quantities of the Securities to be issued
or in the determination or calculation of the equation by which the
Securities are to be converted into cash. S&P has no obligation or
liability in connection with the administration, marketing or trading
of the Securities."
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OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities
may from time to time be issued thereunder, without limitation as to
aggregate principal amount, in one or more series and upon such terms as
the Company may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Senior Indenture) on the Voting Stock owned
directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with
or into any other corporation, and the Company may sell, lease or convey
all or substantially all of its assets to any corporation, provided that
(i) the corporation (if other than the Company) formed by or resulting from
any such consolidation or merger or which shall have received such assets
shall be a corporation organized and existing under the laws of the United
States of America or a state thereof and shall assume payment of the
principal of (and premium, if any) and interest on the
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Senior Debt Securities and the performance and observance of all of the
covenants and conditions of the Senior Indenture to be performed or
observed by the Company, and (ii) the Company or such successor
corporation, as the case may be, shall not immediately thereafter be in
default under the Senior Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose Holders is required to modify or amend the Indenture;
or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Senior Debt Securities necessary to waive any past default to
less than a majority. No modification or amendment of the Subordinated
Indenture or any Subsequent Indenture for Subordinated Debt Securities may
adversely affect the rights of any holder of Senior Indebtedness without
the consent of such Holder. Except with respect to certain fundamental
provisions, the Holders of at least a majority in principal amount of
Outstanding Senior Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default
with respect to Senior Debt Securities of any series: (a) default in the
payment of any interest or Additional Amounts payable on any Senior Debt
Security of that series when due, continued for 30 days; (b) default in the
payment of any principal or premium, if any, on any Senior Debt Security of
that series when due; (c) default in the deposit of any sinking fund
payment, when due, in respect of any Senior Debt Security of that series;
(d) default in the performance of any other covenant of the Company
contained in the Indenture for the benefit of such series or in the Senior
Debt Securities of such series, continued for 60 days after written notice
as provided in the Senior Indenture; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default provided
with respect to Senior Debt Securities of that series. The Trustee or the
Holders of 25% in principal amount of the Outstanding Senior Debt
Securities of that series may declare the principal amount (or such lesser
amount as may be provided for in the Senior Debt Securities of that series)
of all Outstanding Senior Debt Securities of that series and the interest
due thereon and Additional Amounts payable in respect thereof, if any to be
due and payable immediately if an Event of Default with respect to Senior
Debt Securities of such series shall occur and be continuing at the time of
such declaration. At any time after a declaration of acceleration has been
made with respect to Senior Debt Securities of any series but before a
judgment or decree for payment of money due has been obtained by the
Trustee, the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those
due as a result of acceleration) have been made and all Events of Default
have been remedied or waived. Any Event of Default with respect to Senior
Debt Securities of any series may be waived by the Holders of a majority in
principal amount of all Outstanding Senior Debt Securities of that series,
except in a case of failure to pay principal or premium, if any, or
interest or Additional Amounts payable on any Senior Debt Security of that
series for which payment had not been subsequently made or in respect of a
covenant or provision which cannot be modified or amended without the
consent of the Holder of each Outstanding Senior Debt Security of such
series affected.
The Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive
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from such Holders reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in complying with
any such direction.
The Company is required to furnish to the Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
EUROPEAN PORTFOLIO MARKET INDEX TARGET-TERM SECURITIES/SM/ DUE JUNE 30, 1999
("MITTS/(R)/")
----------
On December 30, 1993, Merrill Lynch & Co., Inc. (the "Company") issued an
aggregate principal amount of $31,000,000 of European Portfolio Market Index
Target-Term Securities due June 30, 1999 (the "Securities" or "MITTS").
Each $10 principal amount of Securities will be deemed a "Unit" for purposes of
trading and transfer at the Securities Depository described below. Units will
be transferable by the Securities Depository, as more fully described below, in
denominations of whole Units.
The Securities were offered at an original issue price of 100% of the
principal amount thereof, and will mature on June 30, 1999. At maturity, a
beneficial owner of a Security will be paid an amount based upon the change in
the value of a portfolio (the "Portfolio") of specified stocks of European
companies measured on December 22, 1993 (the "Original Portfolio Value") through
the Calculation Period, all as more fully described herein; provided, however,
that the amount payable at maturity will not be less than $9.00 for each Unit of
the Securities (the "Minimum Payment"). The Closing Portfolio Value will be
based on certain values of the specified stocks during a period prior to the
maturity date of the Securities (the "Calculation Period"). While at maturity a
beneficial owner of a Security may receive an amount in excess of the principal
amount of such Security if the Closing Portfolio Value exceeds the Original
Portfolio Value, there will be no payment of interest, periodic or otherwise,
prior to maturity.
IF THE CLOSING PORTFOLIO VALUE IS LESS THAN THE ORIGINAL PORTFOLIO VALUE,
THE AMOUNT PAYABLE AT MATURITY WITH RESPECT TO A SECURITY WILL BE LESS THAN THE
PRINCIPAL AMOUNT OF SUCH SECURITY.
The Securities were issued as a series of Senior Debt Securities under the
Senior Indenture described herein. The Securities are not redeemable prior to
maturity.
For information as to the calculation of the amount that will be paid at
maturity and the calculation and the composition of the European portfolio, see
"Description of Securities" and "The Portfolio" in this Prospectus. FOR OTHER
INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "SPECIAL
CONSIDERATIONS" IN THIS PROSPECTUS.
Ownership of the Securities will be maintained in book-entry form by or
through the Securities Depository. Beneficial owners of the Securities will not
have the right to receive physical certificates evidencing their ownership
except under the limited circumstances described herein.
The Securities have been approved for listing on the New York Stock
Exchange under the symbol "MEE".
_____________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
ANY EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
_____________
This Prospectus has been prepared in connection with the Securities and is
to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly-owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Securities.
MLPF&S may act as principal or agent in such transactions. The Securities may
be offered on a national securities exchange in the event the particular issue
of Securities has been listed on such exchange, or off such exchange in
negotiated transactions, or otherwise. Sales will be made at prices related to
prevailing prices at the time of sale. The distribution of the Securities will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
----------
Merrill Lynch & Co.
----------
The date of this Prospectus is , 1995.
/(R)/"MITTS" is a registered service mark and /SM/"Market Index Target-Term
Securities" is a service mark of Merrill Lynch & Co., Inc.
<PAGE>
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Securities made hereby nor has
the Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December
30, 1994, Quarterly Reports on Form 10-Q for the periods ended March 31,
1995 and June 30, 1995, and Current Reports on Form 8-K dated January 12,
1995, January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995,
March 9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995,
July 21, 1995, August 1, 1995, and August 2, 1995 filed pursuant to Section
13 of the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the maturity of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
If the Closing Portfolio Value is less than the Original Portfolio
Value, beneficial owners of the Securities will receive less than the
principal amount of such Securities at maturity, but not less than the
Minimum Payment. Beneficial owners would receive only the return of
principal if the Closing Portfolio Value should equal the Original
Portfolio Value. This will be true even though the Portfolio Value as of
some interim period or periods prior to the Calculation Period may have
exceeded the Original Portfolio Value, since the Closing Portfolio Value is
calculated on the basis of the average of the value of Portfolio Securities
only on the Calculation Days.
Even if the principal of the Securities is fully returned, such return
of principal does not reflect any opportunity cost implied by inflation and
other factors relating to the time value of money.
3
<PAGE>
The return based on the Closing Portfolio Value relative to the
Original Portfolio Value generally will not produce the same return as if
the Portfolio Securities were purchased and held for a similar period,
because, among other reasons, any payment at maturity on the Securities
based on an increase in the value of the Portfolio will not reflect the
payment of dividends on the Portfolio Securities.
The Indenture provides that the Indenture and the Securities will be
governed by and construed in accordance with the laws of New York. Under
present New York law the maximum rate of interest is 25% per annum on a
simple interest basis. This limit may not apply to Securities in which
$2,500,000 or more has been invested. While the Company believes that New
York law would be given effect by a state or federal court sitting outside
New York, state laws frequently regulate the amount of interest that may be
charged to and paid by a borrower (including, in some cases, corporate
borrowers). All payments under the Securities (other than the return of
principal) could be considered interest for the purpose of state usury
laws. The Company will covenant for the benefit of the Holders of the
Securities, to the extent permitted by law, not to claim voluntarily the
benefits of any laws concerning usurious rates of interest against a Holder
of the Securities.
TRADING
The Securities have been approved for listing on the New York Stock
Exchange. There can be no assurance as to how the Securities will trade in
the secondary market or whether such market will be liquid. It is expected
that the secondary market for the Securities will be affected by the
creditworthiness of the Company and by a number of other factors. The
trading value of the Securities is expected to depend primarily on the
extent of the appreciation, if any, of the Portfolio Value over the
Original Portfolio Value. If, however, Securities are sold prior to the
maturity date at a time when the Portfolio Value exceeds the Original
Portfolio Value, the sale price may be at a discount from the amount
expected to be payable to the beneficial owner if such excess of the
Portfolio Value over the Original Portfolio Value were to prevail during
the Calculation Period. Furthermore, the price at which a beneficial owner
will be able to sell Securities prior to maturity may be at a discount,
which could be substantial, from the principal amount thereof, if, at such
time, the Portfolio Value is below, equal to or not sufficiently above the
Original Portfolio Value. A discount could also result from rising
interest rates.
The trading values of the Securities may be affected by a number of
interrelated factors, including those listed below. The relationship among
these factors is complex, including how these factors affect the value of
the principal amount of the Securities payable at maturity, if any, in
excess of the principal amount of the Securities. Accordingly, investors
should be aware that factors other than the level of the Portfolio Value
are likely to affect their trading value. The expected theoretical effect
on the trading value of the Securities of each of the factors listed below,
assuming in each case that all other factors are held constant, is as
follows:
Interest Rates. In general, if U.S. interest rates increase, the
value of the Securities is expected to decrease. If U.S. interest
rates decrease, the value of the Securities is expected to increase.
Local interest rates may also affect the economies of countries in
which issuers of the Portfolio Securities or the shares underlying the
Portfolio Securities operate, and, in turn, affect the Portfolio
Value.
Volatility of the Portfolio Value. If the volatility of the
Portfolio Value increases, the trading value of the Securities is
expected to increase. If the volatility of the Portfolio Value
decreases, the trading value of the Securities is expected to
decrease.
Time Remaining to Maturity. The Securities may trade at a value
above that which may be inferred from the level of the Portfolio
Value. This difference will reflect a "time premium" due to
expectations concerning the Portfolio Value during the period prior to
maturity of the Securities. As the time remaining to maturity of the
Securities decreases, however, this time premium is expected to
decrease, thus decreasing the trading value of the Securities.
Dividend Rates. If dividend rates on the Portfolio Securities
and Underlying Shares (as defined herein) increase, the value of the
Securities is expected to decrease. Conversely, if dividend rates on
the
4
<PAGE>
Portfolio Securities and Underlying Shares decrease, the value of the
Securities is expected to increase. Local general corporate dividend
rates may also affect the Portfolio Value and, in turn, the value of
the Securities.
FOREIGN CURRENCY EXCHANGE RATE AND FOREIGN MARKET CONSIDERATIONS
The Securities are U.S. dollar-denominated securities issued by the
Company, a United States corporation. Investments in the Securities do not
give the beneficial owners any right to receive any Portfolio Security or
any other ownership right or interest in the Portfolio Securities, although
the return on the investment in the Securities is based on the Portfolio
Value of the Portfolio Securities. All of the Portfolio Securities (or
securities underlying the ADRs included in the Portfolio) have been issued
by non-United States companies. The prices of the securities underlying
the ADRs are quoted in currencies other than the U.S. dollar. The U.S.
dollar price of an ADR will depend on the price of the security underlying
the ADR and the exchange rate between such foreign currency and the U.S.
dollar. Even if the price in a foreign currency of the security underlying
an ADR is unchanged, changes in the rates of exchange between the U.S.
dollar and such foreign currency will change the U.S. dollar price of such
ADR. Furthermore, even if the price of the security underlying the ADR in
such foreign currency increases, the U.S. dollar price of such ADR may
decrease as a result of changes in the rates of exchange between the U.S.
dollar and such foreign currency. The U.S. dollar price of a Portfolio
Security that trades in the United States and outside the United States and
is not an ADR will also be similarly affected by changes in the exchange
rate between the U.S. dollar and the foreign currency in which such
Portfolio Security trades outside the United States. Rates of exchange
between the dollar and other currencies are determined by forces of supply
and demand in the foreign exchange markets. These forces are, in turn,
affected by international balance of payments and other economic and
financial conditions, government intervention, speculation and other
factors.
Investments in securities indexed to the value of non-United States
securities involve certain risks. Fluctuations in foreign exchange rates,
future foreign political and economic developments, and the possible
imposition of exchange controls or other foreign governmental laws or
restrictions applicable to such investments may affect the U.S. dollar
value of such securities, including the Portfolio Securities. Securities
prices in different countries are subject to different economic, financial,
political and social factors. Individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position. With respect
to certain countries, there is the possibility of expropriation of assets,
confiscatory taxation, political or social instability or diplomatic
developments which could affect the value of investments in those
countries. There may be less publicly available information about a
foreign company than about a U.S. company, and foreign companies may not be
subject to accounting, auditing and financial reporting standards and
requirements comparable to those to which U.S. entities are subject.
Certain foreign investments may be subject to foreign withholding taxes
which could affect the value of investment in these countries. In
addition, investment laws in certain foreign countries may limit or
restrict ownership of certain securities by foreign nationals by
restricting or eliminating voting or other rights or limiting the amount of
securities that may be so owned, and such limitations or restrictions may
affect the prices of such securities.
Foreign financial markets, while currently growing in volume, may have
substantially less volume than U.S. markets, and securities of many foreign
companies are less liquid and their prices more volatile than securities of
comparable domestic companies. The foreign markets have different trading
practices that may affect the prices of securities. Certain of the foreign
markets on which shares underlying ADRs which are Portfolio Securities
trade impose trading restrictions if certain price movements occur. The
foreign markets have different clearance and settlement procedures, and in
certain countries there have been times when settlements have been unable
to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. There is generally less government
supervision and regulation of exchanges, brokers and issuers in foreign
countries than there is in the U.S. In addition, the terms and conditions
of depositary facilities may result in less liquidity or lower market
values for the Portfolio Securities than for the underlying stocks.
5
<PAGE>
AMERICAN DEPOSITARY RECEIPTS
Certain of the Portfolio Securities are in the form of American
Depositary Receipts ("ADRs"). An ADR is a negotiable receipt which is
issued by a depositary, generally a bank, representing shares (the
"Underlying Shares") of a foreign issuer (the "Foreign Issuer") that have
been deposited and are held, on behalf of the holders of the ADRs, at a
custodian bank in the Foreign Issuer's home country. While the market for
Underlying Shares will generally be in the country in which the Foreign
Issuer is organized, and trading in such market will generally be based on
that country's currency, ADRs that are Portfolio Securities will trade in
U.S. Dollars.
Although ADRs are distinct securities from the Underlying Shares, the
trading characteristics and valuations of ADRs will usually, but not
necessarily, mirror the characteristics and valuations of the Underlying
Shares represented by the ADRs. Active trading volume and efficient
pricing in the principal market in the home country for the Underlying
Shares will usually indicate similar characteristics in respect of the
ADRs. In the case of certain ADRs, however, there may be inadequate
familiarity with or information about the Foreign Issuer of the Underlying
Shares represented by the ADR in the market in which the ADR trades to
support active volume, thus resulting in pricing distortions. This is more
likely to occur when the ADR is not listed on a U.S. stock exchange or
quoted on the National Market System of the National Association of
Securities Dealers Automated Quotations System ("NASDAQ"), and trades only
in the over-the-counter market, because the Foreign Issuer is not required
to register such ADRs under the U.S. Securities Exchange Act of 1934, as is
the case with ADRs so listed or quoted. In addition, because of the size
of an offering of Underlying Shares in ADR form outside the home country
and/or other factors that have limited or increased the float of certain
ADRs, the liquidity of such securities may be less than or greater than
that with respect to the Underlying Shares. Inasmuch as holders of ADRs
may surrender the ADR in order to take delivery of and trade the Underlying
Shares, a characteristic that allows investors in ADRs to take advantage of
price differentials between different markets, a market for the Underlying
Shares that is not liquid will generally result in an illiquid market for
the ADR representing such Underlying Shares.
The depositary bank that issues an ADR generally charges a fee, based
on the price of the ADR, upon issuance and cancellation of the ADR. This
fee would be in addition to the brokerage commissions paid upon the
acquisition or surrender of the security. In addition, the depositary bank
incurs expenses in connection with the conversion of dividends or other
cash distributions paid in local currency into U.S. Dollars and such
expenses are deducted from the amount of the dividend or distribution paid
to holders, resulting in a lower payout per Underlying Share represented by
the ADR than would be the case if the Underlying Share were held directly.
Furthermore, foreign investment laws in certain countries may restrict
ownership by foreign nationals of certain classes of Underlying Shares.
Accordingly, the ADR representing such class of securities may not possess
voting rights, if any, equivalent to those in respect of the Underlying
Shares. Certain tax considerations, including tax rate differentials,
arising from application of the tax laws of one nation to the nationals of
another and from certain practices in the ADR market may also exist with
respect to certain ADRs. In varying degrees, any or all of these factors
may affect the value of the ADR compared with the value of the Underlying
Shares in the home market of the issuer.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully
considering the suitability of the Securities in the light of each
investor's particular circumstances.
Investors should also consider the tax consequences of investing in
the Securities.
6
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The Securities were issued as a series of Senior Debt Securities under
the Senior Indenture, dated as of April 1, 1983, as amended and restated.
The principal amount of each Security will equal $10 for each $10 initial
price to the public. The Securities will mature on June 30, 1999.
While at maturity a beneficial owner of a Security may receive an
amount in excess of the principal amount of such Security if the Closing
Portfolio Value exceeds the Original Portfolio Value, there will be no
payment of interest, periodic or otherwise, prior to maturity. (See
"Payment at Maturity", below.)
The Securities are not subject to redemption by the Company or at the
option of any Holder prior to maturity. Upon the occurrence of an Event of
Default with respect to the Securities, Holders of the Securities may
accelerate the maturity of the Securities, as described below.
The Securities are to be issued in denominations of whole Units. Each
Unit is equal to $10 principal amount of the Securities.
PAYMENT AT MATURITY
At maturity, a beneficial owner of a Security will be entitled to
receive, with respect to each $10 principal amount of the Security, an
amount equal to the following:
Closing Portfolio Value
$10 X -----------------------
$100
provided, however, that the amount payable at maturity will not be less
than $9 for each $10 principal amount of Securities (the "Minimum
Payment"). Based on the prices of the Portfolio Securities on the date of
this Prospectus Supplement, the Multipliers have been initially set so that
the value of the Portfolio on such date equals $100 (the "Original
Portfolio Value").
If the Closing Portfolio Value is equal to $90 or less, a beneficial
owner of a Security will receive the Minimum Payment of $9 for each $10
principal amount of the Securities at maturity. If the Closing Portfolio
Value is between $90 and $100, a beneficial owner of a Security will
receive between $9 and $10 for each $10 principal amount of the Securities
at maturity.
The "Closing Portfolio Value" will be determined by Merrill Lynch,
Pierce, Fenner & Smith Incorporated ("MLPF&S"), an affiliate of the
Company, or successor thereto (the "Calculation Agent"), and will equal the
sum of the products of the Average Market Price and the applicable
Multiplier for each Portfolio Security. The "Average Market Price" of a
Portfolio Security will equal the average (mean) of the Market Prices of
such Portfolio Security determined on each of the first forty-five
Calculation Days with respect to such Portfolio Security during the
Calculation Period. If there are fewer than forty-five Calculation Days
with respect to a Portfolio Security, then the Average Market Price with
respect to such Portfolio Security will equal the average (mean) of the
Market Prices on such Calculation Days, and if there is only one
Calculation Day, then the Average Market Price will equal the Market Price
on such Calculation Day. The "Calculation Period" means the period from
and including the ninetieth scheduled NYSE Trading Day prior to the
maturity date to and including the fourth scheduled NYSE Trading Day prior
to the maturity date. "Calculation Day" with respect to a Portfolio
Security means any Trading Day during the Calculation Period in the country
in which such Portfolio Security is being priced on which a Market
Disruption Event has not occurred. If a Market Disruption Event occurs on
all Trading Days in such country during the Calculation Period then the
fourth scheduled NYSE Trading Day prior to the maturity date in such
country will be deemed a Calculation Day, notwithstanding the Market
Disruption Event; provided, however, that if such fourth scheduled NYSE
Trading Day is not a Trading Day in such country, then the immediately
preceding Trading Day
7
<PAGE>
shall instead be deemed a Calculation Day. Any reference to a specific day
herein shall mean such calendar day in each market in which Portfolio
Securities are priced.
"Market Price" means for a Calculation Day the following:
(a) If the Portfolio Security is listed on a national securities
exchange in the United States, is a NASDAQ National Market System
("NASDAQ NMS") security or is included in the OTC Bulletin Board
Service ("OTC Bulletin Board") operated by the National Association of
Securities Dealers, Inc. (the "NASD"), Market Price means (i) the last
reported sale price, regular way, on such day on the principal United
States securities exchange registered under the Securities Exchange
Act of 1934 on which such Portfolio Security is listed or admitted to
trading, or (ii) if not listed or admitted to trading on any such
securities exchange or if such last reported sale price is not
obtainable, the last reported sale price on the over-the-counter
market as reported on the NASDAQ NMS or OTC Bulletin Board on such
day, or (iii) if the last reported sale price is not available
pursuant to (i) and (ii) above, the mean of the last reported bid and
offer price on the over-the-counter market as reported on the NASDAQ
NMS or OTC Bulletin Board on such day as determined by the Calculation
Agent. The term "NASDAQ NMS security" shall include a security
included in any successor to such system and the term "OTC Bulletin
Board Service" shall include any successor service thereto.
(b) If the Portfolio Security is not listed on a national
securities exchange in the United States or is not a NASDAQ NMS
security or included in the OTC Bulletin Board operated by the NASD,
Market Price means the last reported sale price on such day on the
securities exchange on which such Portfolio Security is listed or
admitted to trading with the greatest volume of trading for the
calendar month preceding such day as determined by the Calculation
Agent, provided that if such last reported sale price is for a
transaction which occurred more than four hours prior to the close of
such exchange, then the Market Price shall mean the average (mean) of
the last available bid and offer price on such exchange. If such
Portfolio Security is not listed or admitted to trading on any such
securities exchange or if such last reported sale price or bid and
offer are not obtainable, the Market Price shall mean the last
reported sale price on the over-the-counter market with the greatest
volume of trading as determined by the Calculation Agent, provided
that if such last reported sale price is for a transaction which
occurred more than four hours prior to when trading in such over-the-
counter market typically ends, then the Market Price shall mean the
average (mean) of the last available bid and offer prices in such
market of the three dealers which have the highest volume of
transactions in such Portfolio Security in the immediately preceding
calendar month as determined by the Calculation Agent based on
information that is reasonably available to it. If such prices are
quoted in a currency other than in U.S. Dollars, such prices will be
translated into U.S. Dollars for purposes of calculating the Average
Market Price using the Spot Rate on the same calendar day as the date
of any such price. The "Spot Rate" on any date will be determined by
the Calculation Agent and will equal the spot rate of such currency
per U.S. $1.00 on such date at approximately 3:00 p.m., New York City
time, as reported on the information service operated by Bloomberg,
L.P. ("Bloomberg") representing the mean of certain dealers in such
currency or, if Bloomberg has not reported such rate by 3:30 p.m., New
York City time, on such day, the offered spot rate of such currency
per U.S. $1.00 on such date for a transaction amount in an amount
customary for such market on such date quoted at approximately 3:30
p.m., New York City time, by a leading bank in the foreign exchange
markets as may be selected by the Calculation Agent.
If the Calculation Agent is required to use the bid and offer price
for a Portfolio Security to determine the Market Price of such Portfolio
Security pursuant to the foregoing, the Calculation Agent shall not use any
bid or offer price announced by Merrill Lynch, Pierce, Fenner & Smith
Incorporated or any other affiliate of the Company.
As used herein, "NYSE Trading Day" shall mean a day on which trading
is generally conducted in the over-the-counter market for equity securities
in the United States and on the New York Stock Exchange as
8
<PAGE>
determined by the Calculation Agent. "Trading Day" shall mean a day on
which trading is conducted on the principal securities exchanges in the
country in which such Portfolio Security is being priced.
"Market Disruption Event" with respect to a Portfolio Security means
either of the following events, as determined by the Calculation Agent:
(i) the suspension or material limitation (provided that, with
respect to Portfolio Securities that are priced in the United States,
limitations pursuant to New York Stock Exchange Rule 80A (or any
applicable rule or regulation enacted or promulgated by the New York
Stock Exchange, any other self regulatory organization or the
Securities and Exchange Commission of similar scope as determined by
the Calculation Agent) on trading during significant market
fluctuations shall be considered "material" for purposes of this
definition) in the trading of such Portfolio Security in the country
in which such Portfolio Security is being priced for more than two
hours of trading or during the period one-half hour prior to the time
that such Portfolio Security is to be priced, or
(ii) the suspension or material limitation (whether by reason of
movements in price otherwise exceeding levels permitted by the
relevant exchange or otherwise) in option contracts related to a
Portfolio Security traded on any exchange in the country in which such
Portfolio Security is being priced for more than two hours of trading
or during the period one-half hour prior to the time that such
Portfolio Security is to be priced.
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange. Under certain circumstances, the
duties of MLPF&S as Calculation Agent in determining the existence of
Market Disruption Events could conflict with the interests of MLPF&S as an
affiliate of the issuer of the Securities, Merrill Lynch & Co., Inc., and
with the interests of beneficial owners of the Securities.
All determinations made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Company and
beneficial owners of the Securities. All percentages resulting from any
calculation on the Securities will be rounded to the nearest one hundred-
thousandth of a percentage point, with five one-millionths of a percentage
point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to
9.87655% (or .0987655)), and all dollar amounts used in or resulting from
such calculation will be rounded to the nearest cent with one-half cent
being rounded upwards.
Portfolio Securities
The securities listed below will be used to calculate the value of the
Portfolio. Holders of the MITTS will not have any right to receive the
Portfolio Securities or the Underlying Shares. The following table sets
forth the Portfolio Securities, the percentage of each Portfolio Security
in the Original Portfolio Value and their Initial Multipliers:
9
<PAGE>
<TABLE>
<CAPTION>
% of Portfolio
Value
Represented
Issuer of the Country in in Original Initial
Portfolio Security Which Organized ADR Portfolio Value Multiplier
- ------------------------------------ --------------- --- ---------------- ----------
<S> <C> <C> <C> <C>
Alcatel Alsthom Compagnie
Generale d'Electricite(1)......... France Yes 4.167% 0.145560
Banco de Santander S.A.(1).......... Spain Yes 4.167% 0.084388
Bayer A.G.(3)....................... Germany No 4.167% 0.019832
Benetton Group S.p.A.(1)............ Italy Yes 4.167% 0.130719
The British Petroleum Co.,
plc.(1)............................ United Kingdom Yes 4.167% 0.064977
British Telecom-
munications plc.(1)................. United Kingdom Yes 4.167% 0.056402
Cadbury Schweppes plc(1)............ United Kingdom Yes 4.167% 0.136054
Deutsche Bank A.G.(3)............... Germany No 4.167% 0.008103
L.M. Ericsson Telephone
Co., Inc. (1)..................... Sweden Yes 4.167% 0.103842
Grand Metropolitan plc(1) United Kingdom Yes 4.167% 0.148810
Hanson plc(1)....................... United Kingdom Yes 4.167% 0.205761
Hoechst A.G.(3)..................... Germany No 4.167% 0.023662
Nestle S.A.(3)...................... Switzerland No 4.167% 0.004792
Philips Electronics N.V.(2)......... Netherlands No 4.167% 0.198413
Reuters Holdings plc(1)............. United Kingdom Yes 4.167% 0.051125
Rhone-Poulenc S.A.(1)............... France Yes 4.167% 0.166667
Royal Dutch Petroleum Co.(2)........ Netherlands No 4.167% 0.039683
Siemens A.G.(3)..................... Germany No 4.167% 0.009207
Societe Nationale Elf Aquitaine(1)..
France Yes 4.167% 0.115741
Telefonica de Espana, S.A.(1)....... Spain Yes 4.167% 0.104167
Total S.A.(1)....................... France Yes 4.167% 0.153610
Unilever plc(1)..................... United Kingdom Yes 4.167% 0.057870
Vodaphone Group plc(1).............. United Kingdom Yes 4.167% 0.047755
Waste Management
International plc(1).............. United Kingdom Yes 4.167% 0.234742
</TABLE>
_______________
(1) As represented in the Portfolio by American Depositary Receipts.
(2) As represented in the Portfolio by ordinary shares traded in U.S.
dollars.
(3) As represented in the Portfolio by ordinary shares traded outside the
U.S. and denominated in other than U.S. dollars.
10
<PAGE>
The initial Multiplier relating to each Portfolio Security indicates
the number of such Portfolio Security, given the market price of such
Portfolio Security, required to be included in the calculation of the
Original Portfolio Value so that each Portfolio Security represents an
equal percentage of the Original Portfolio Value as of the date of this
Prospectus Supplement. The price of each Portfolio Security used to
calculate the initial Multiplier relating to each such Portfolio Security
was the closing price of such Portfolio Security on the date of this
Prospectus Supplement. The respective Multipliers will remain constant for
the term of the Securities unless adjusted for certain corporate events, as
described below.
The Portfolio Value, for any day, will equal the sum of the products
of the most recently available Market Prices (determined as described
herein) and the applicable Multipliers for the Portfolio Securities. The
Closing Portfolio Value, however, is calculated based on averaging Market
Prices for certain days.
The Calculation Agent currently intends to publish the Portfolio Value
once on each business day. The Calculation Agent currently calculates and
publishes values of approximately 1,100 specified portfolios. The
Calculation Agent currently provides information concerning such portfolios
to the electronic reporting services operated by Bloomberg, L.P. and to
newspapers and specialized trade publications. If the Calculation Agent
does publish Portfolio Values, the Calculation Agent currently intends to
provide such values to similar sources described above, but there can be no
assurance that such information will ultimately be published by such
sources. In addition, the Calculation Agent will provide the Portfolio
Value upon request, and will provide the Portfolio Value once each business
day to the New York Stock Exchange which has agreed to report such
Portfolio Value on its electronic transaction reporting services under the
symbol "MEP".
ADJUSTMENTS TO THE MULTIPLIER AND PORTFOLIO
The Multiplier with respect to any Portfolio Security and the
Portfolio will be adjusted as follows:
1. If a Portfolio Security is subject to a stock split or
reverse stock split or a Portfolio Security that is an ADR is subject
to a similar adjustment, then once such split has become effective,
the Multiplier relating to such Portfolio Security will be adjusted to
equal the product of the number of shares issued with respect to one
such share of such Portfolio Security, or the number of receipts
issued with respect to one ADR if a Portfolio Security is an ADR, and
the prior multiplier.
2. If a Portfolio Security is subject to a stock dividend
(issuance of additional shares of the Portfolio Security) that is
given equally to all holders of shares of the issuer of such Portfolio
Security, then once the dividend has become effective and such
Portfolio Security is trading ex-dividend, the Multiplier will be
adjusted so that the new Multiplier shall equal the former Multiplier
plus the product of the number of shares of such Portfolio Security
issued with respect to one such share of such Portfolio Security and
the prior multiplier.
3. There will be no adjustments to the Multipliers to reflect
cash dividends or distributions paid with respect of a Portfolio
Security other than for Extraordinary Dividends as described below. A
cash dividend with respect to a Portfolio Security will be deemed to
be an "Extraordinary Dividend" if such dividend exceeds the
immediately preceding non-Extraordinary Dividend for such Portfolio
Security by an amount equal to at least 10% of the Market Price on the
Trading Day preceding the record day for the payment of such
Extraordinary Dividend (the "ex-dividend date"). If an Extraordinary
Dividend occurs with respect to a Portfolio Security, the Multiplier
with respect to such Portfolio Security will be adjusted on the ex-
dividend date with respect to such Extraordinary Dividend so that the
new Multiplier will equal the product of (i) the then current
Multiplier, and (ii) a fraction, the numerator of which is the sum of
the Extraordinary Dividend Amount and the Market Price on the Trading
Day preceding the ex-dividend date, and the denominator of which is
the Market Price on the Trading Day preceding the ex-dividend date.
The "Extraordinary Dividend Amount" with respect to an Extraordinary
Dividend for a Portfolio Security will equal such Extraordinary
Dividend minus the amount of the immediately preceding non-
Extraordinary Dividend for such Portfolio Security.
11
<PAGE>
4. If the issuer of a Portfolio Security, or, if a Portfolio Security
is an ADR, the issuer of the Underlying Share, is being liquidated or
is subject to a proceeding under any applicable bankruptcy, insolvency
or other similar law, such Portfolio Security will continue to be
included in the Portfolio so long as a Market Price for such Portfolio
Security is available. If a Market Price is no longer available for a
Portfolio Security for whatever reason, including the liquidation of
the issuer of such Portfolio Security or the subjection of the issuer
of such Portfolio Security to a proceeding under any applicable
bankruptcy, insolvency or other similar law, then the value of such
Portfolio Security will equal zero in connection with calculating
Portfolio Value and Closing Portfolio Value for so long as no Market
Price is available, and no attempt will be made to find a replacement
stock or increase the value of the Portfolio to compensate for the
deletion of such Portfolio Security.
5. If the issuer of a Portfolio Security, or, if a Portfolio
Security is an ADR, the issuer of the Underlying Share, has been
subject to a merger or consolidation and is not the surviving entity
or is nationalized, then a value for such Portfolio Security will be
determined at the time such issuer is merged or consolidated or
nationalized and will equal the last available Market Price for such
Portfolio Security and that value will be constant for the remaining
term of the Securities. At such time, no adjustment will be made to
the Multiplier of such Portfolio Security. The Company may at its
sole discretion increase such last available Market Price to reflect
payments or dividends of cash, securities or other consideration to
holders of such Portfolio Security in connection with such a merger or
consolidation which may not be reflected in such last available Market
Price.
6. If the issuer of a Portfolio Security issues to all of its
shareholders equity securities of an issuer other than the issuer of
the Portfolio Security, then such new equity securities will be added
to the Portfolio as a new Portfolio Security. The Multiplier for such
new Portfolio Security will equal the product of the original
Multiplier with respect to the Portfolio Security for which the new
Portfolio Security is being issued (the "Original Portfolio Security")
and the number of shares of the new Portfolio Security issued with
respect to one share of the Original Portfolio Security.
7. If an ADR is no longer listed or admitted to trading on a
United States securities exchange registered under the Securities
Exchange Act of 1934, is no longer a NASDAQ NMS security or is no
longer included in the OTC Bulletin Board operated by the NASD, then
the Underlying Shares represented by such ADR will be deemed to be a
new Portfolio Security and such ADR will no longer constitute a
Portfolio Security. The initial Multiplier for such new Portfolio
Security will equal the last value of the Multiplier for such ADR
multiplied by the number of shares of Underlying Shares represented by
a single ADR.
No adjustments of any Multiplier of a Portfolio Security will be
required unless such adjustment would require a change of at least 1% in
the Multiplier then in effect. The Multiplier resulting from any of the
adjustments specified above will be rounded to the nearest one thousandth
with five ten-thousandths being rounded upward.
No adjustments to the Multiplier of any Portfolio Security or to the
Portfolio will be made other than those specified above.
12
<PAGE>
HYPOTHETICAL PAYMENTS
The following table illustrates, for a range of hypothetical Closing
Portfolio Values, the amount payable at maturity for each $10 principal
amount of Securities and the pretax annualized rate of return to beneficial
owners of the Securities. AN INVESTMENT IN THE PORTFOLIO SECURITIES WOULD
BE SIGNIFICANTLY DIFFERENT THAN INVESTING IN THE SECURITIES. AMONG OTHER
THINGS, AN INVESTOR IN THE PORTFOLIO SECURITIES MAY REALIZE CERTAIN
DIVIDENDS THAT ARE NOT REFLECTED BY INVESTING IN THE SECURITIES, AND
CURRENCY FLUCTUATIONS MAY SIGNIFICANTLY INCREASE OR DECREASE THE RATE OF
RETURN OF THE PORTFOLIO SECURITIES VERSUS INVESTING IN THE SECURITIES.
<TABLE>
<CAPTION>
Hypothetical Closing Percentage Change Annualized Percentage Payment at Maturity Pretax Annualized
Value of the Portfolio in the Portfolio Change in the per $10 Principal Rate of Return
Value Level Portfolio Level Amount of Securities at Maturity(1)
- --------------------------- ------------------------ ----------------------- ---------------------- -------------------------
<S> <C> <C> <C> <C>
0.00 -100.00% -100.00% $ 9.00 -1.91%
10.00 -90.00% -37.77% $ 9.00 -1.91%
20.00 -80.00% -27.22% $ 9.00 -1.91%
30.00 -70.00% -20.73% $ 9.00 -1.91%
40.00 -60.00% -15.98% $ 9.00 -1.91%
50.00 -50.00% -12.21% $ 9.00 -1.91%
60.00 -40.00% -9.08% $ 9.00 -1.91%
70.00 -30.00% -6.38% $ 9.00 -1.91%
80.00 -20.00% -4.02% $ 9.00 -1.91%
90.00 -10.00% -1.91% $ 9.00 -1.91%
100.00 0.00% 0.00% $10.00 0.00%
110.00 10.00% 1.74% $11.00 1.74%
120.00 20.00% 3.34% $12.00 3.34%
130.00 30.00% 4.83% $13.00 4.83%
140.00 40.00% 6.21% $14.00 6.21%
150.00 50.00% 7.51% $15.00 7.51%
160.00 60.00% 8.73% $16.00 8.73%
170.00 70.00% 9.88% $17.00 9.88%
180.00 80.00% 10.98% $18.00 10.98%
190.00 90.00% 12.02% $19.00 12.02%
200.00 100.00% 13.01% $20.00 13.01%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis. All returns assume a
maturity of five and one half years from the date of original issuance.
The "Annualized Percentage Change in the Portfolio Level" does not
reflect payment of dividends with respect to the Portfolio Securities.
The above figures are for purposes of illustration only. The actual
amount payable at maturity with respect to the Securities will depend
entirely on the actual Closing Portfolio Value.
The investor will not receive their entire principal at maturity
should the market decline in value. The investor will only receive $9.00
for each $10 principal amount of Securities (90% of their original
investment) should the market decline by 10% or more.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a Holder of a Security
upon any acceleration permitted by the Securities will be equal to the
amount payable calculated as though the date of early repayment were the
maturity date of the Securities. See "Description of Securities-Payment at
Maturity" in this Prospectus. If a bankruptcy proceeding is commenced in
respect of the Company, the claim of the Holder of a Security may be
limited, under Section 502(b)(2) of Title 11 of the United States Code, to
the principal amount of the Security plus an additional amount, if any, of
contingent
13
<PAGE>
interest calculated as though the date of the commencement of the
proceeding were the maturity date of the Securities.
In case of default in payment at the maturity date of the Securities
(whether at their stated maturity or upon acceleration), from and after the
maturity date the Securities shall bear interest, payable upon demand of
the Holders thereof, at the rate of 6% per annum (to the extent that
payment of such interest shall be legally enforceable) on the unpaid amount
due and payable on such date in accordance with the terms of the Securities
to the date payment of such amount has been made or duly provided for.
SECURITIES DEPOSITORY
The Securities are represented by one or more fully registered global
securities (the "Global Securities"). Each such Global Security has been
deposited with, or on behalf of, The Depository Trust Company, as
Securities Depository, registered in the name of the Securities Depository
or a nominee thereof. Unless and until it is exchanged in whole or in part
for Securities in definitive form, no Global Security may be transferred
except as a whole by the Securities Depository to a nominee of such
Securities Depository or by a nominee of such Securities Depository to such
Securities Depository or another nominee of such Securities Depository or
by such Securities Depository or any such nominee to a successor of such
Securities Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold securities of its
participants ("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 Securities Depository's Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations.
The Securities Depository is owned by a number of Participants and by
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and
the National Association of Securities Dealers, Inc. Access to the
Securities Depository book-entry system is also available to others, such
as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Purchases of Securities must be made by or through Participants, which
will receive a credit on the records of the Securities Depository. The
ownership interest of each actual purchaser of each Security ("Beneficial
Owner") is in turn to be recorded on the Participants' or Indirect
Participants' records. Beneficial Owners will not receive written
confirmation from the Securities Depository of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Participant or Indirect Participant through which the
Beneficial Owner entered into the transaction. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained
by the Securities Depository (with respect to interests of Participants)
and on the records of Participants (with respect to interests of persons
held through Participants). The laws of some states may 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
own, transfer or pledge beneficial interests in Global Securities.
So long as the Securities Depository, or its nominee, is the
registered owner of a Global Security, the Securities Depository or its
nominee, as the case may be, will be considered the sole owner or Holder of
the Securities represented by such Global Security for all purposes under
the Senior Indenture. Except as provided below, Beneficial Owners in a
Global Security will not be entitled to have the Securities represented by
such Global Securities registered in their names, will not receive or be
entitled to receive physical delivery of the Securities in definitive form
and will not be considered the owners or Holders thereof under the Senior
Indenture. Accordingly,
14
<PAGE>
each Person owning a beneficial interest in a Global Security must rely on
the procedures of the Securities Depository 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 Senior
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 Security desires to give or
take any action which a Holder is entitled to give or take under the Senior
Indenture, the Securities Depository 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. Conveyance of notices and other
communications by the Securities Depository to Participants, by
Participants to Indirect Participants, and by Participants and Indirect
Participants to Beneficial Owners will be governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Payment of the principal of, and any additional amount payable at
maturity with respect to, Securities registered in the name of the
Securities Depository or its nominee will be made to the Securities
Depository or its nominee, as the case may be, as the Holder of the Global
Securities representing such Securities. None of the Company, the Trustee
or any other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Securities Depository, upon
receipt of any payment of principal or any additional amount payable at
maturity in respect of a Global Security, will credit the accounts of the
Participants with payment in amounts proportionate to their respective
holdings in principal amount of beneficial interest in such Global Security
as shown on the records of the Securities Depository. The Company also
expects that payments by Participants to Beneficial Owners will be governed
by standing customer instructions and customary practices, as is now the
case with securities held for the accounts of customers in bearer form or
registered in "street name", and will be the responsibility of such
Participants.
If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not
appointed by the Company within 60 days, (y) the Company executes and
delivers to the Trustee a Company Order to the effect that the Global
Securities shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to the Securities, the Global Securities
will be exchangeable for Securities in definitive form of like tenor and of
an equal aggregate principal amount, in denominations of $10 and integral
multiples thereof. Such definitive Securities shall be registered in such
name or names as the Securities Depository shall instruct the Trustee. It
is expected that such instructions may be based upon directions received by
the Securities Depository from Participants with respect to ownership of
beneficial interests in such Global Securities.
THE PORTFOLIO
GENERAL
While the Portfolio consists of stocks (or ADRs representing interests
therein) of European issuers, the Portfolio is not intended to provide an
indication of the pattern of price movements of common stocks of European
corporations generally. All of the Portfolio Securities are registered
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
except for the Portfolio Securities which are ADRs representing shares in
Bayer A.G., Deutsche Bank A.G., Hoechst A.G., Siemens A.G. and Nestle S.A.
Companies with securities registered under the Exchange Act are required to
file periodically certain financial and other information specified by the
Securities and Exchange Commission (the "Commission") (including a
reconciliation of their financial statements to United States generally
accepted accounting principles). Bayer A.G., Deutsche Bank A.G., Hoechst
A.G., Siemens A.G. and Nestle S.A. have qualified for an exemption from the
reporting requirements of the Exchange Act and have agreed to provide to
the Commission certain financial and other information that the issuer
provides to its shareholders or files with stock exchanges in its home
country or is otherwise required to make public. Such
15
<PAGE>
information is not required to contain a reconciliation of their financial
statements to United States generally accepted accounting principles.
Information provided to or filed with the Commission is available at the
offices of the Commission specified under "Available Information" in this
Prospectus. Information contained in such information filed with the
Commission will generally be more limited than that available with respect
to a United States issuer. Neither the Company nor MLPF&S makes any
representation or warranty as to the accuracy or completeness of such
reports. THE INCLUSION OF A PORTFOLIO SECURITY IN THE PORTFOLIO IS NOT A
RECOMMENDATION TO BUY OR SELL SUCH PORTFOLIO SECURITY OR THE UNDERLYING
SHARES RELATING THERETO, AND NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES
MAKE ANY REPRESENTATION TO ANY PURCHASER OF SECURITIES AS TO THE
PERFORMANCE OF THE PORTFOLIO.
The Company or its affiliates may presently or from time to time
engage in business with one or more of the issuers of the Portfolio
Securities or of the Underlying Shares relating to the Portfolio
Securities, including extending loans to, or making equity investments in,
such issuers or providing advisory services to such issuers, including
merger and acquisition advisory services. In the course of such business,
the Company or its affiliates may acquire non-public information with
respect to such issuers and, in addition, one or more affiliates of the
Company may publish research reports with respect to such issuers. The
Company does not make any representation to any purchaser of Securities
with respect to any matters whatsoever relating to such issuers. Any
prospective purchaser of a Security should undertake an independent
investigation of the issuers of the Underlying Shares relating to the
Portfolio Securities as in its judgment is appropriate to make an informed
decision with respect to an investment in the Securities.
EUROPE
The issuers of the Portfolio Securities, or of the shares underlying
the Portfolio Securities which are ADRs, are companies which have been
organized in countries located in Europe. The amount payable at the
maturity of the Securities is dependent on the value of such Portfolio
Securities and the value of such Portfolio Securities will be affected by
political and economic developments in Europe.
The economies of individual European countries may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments position. European countries in recent
years generally have experienced weak economic performance and suffer from
relatively high unemployment levels, slow growth, falling industrial
competitiveness, and increasing costs for social welfare programs.
The European Community (the "EC") as of December 22, 1993 was composed
of 12 members, with Belgium, Denmark, Federal Republic of Germany, France,
Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain and
the United Kingdom. Austria, Finland, Norway, Sweden and Switzerland have
applied for membership in the EC. The EC and the member states are
currently attempting to create a barrier-free single market in goods,
services and capital. The "Treaty on European Union" (also known as the
"Maastricht Treaty") was signed by the governments of the member states of
the EC on February 7, 1992 and is designed to provide for a centralized
economic and monetary authority within the EC. Economic and political
tensions may frustrate any such integration of the EC members.
The securities markets of most European countries have substantially
less trading volume than the securities markets of the United States and
Japan. Further, securities of some European companies are less liquid and
more volatile than securities of comparable U.S. companies. Accordingly,
European securities markets may be subject to greater influence by adverse
events generally affecting the market, and by large investors trading
significant blocks of securities or by large dispositions of securities
than is the case in the United States.
16
<PAGE>
ISSUERS OF THE UNDERLYING SHARES
Among the issuers of Portfolio Securities and the Underlying Shares, 9
are incorporated in the United Kingdom, 4 in the Federal Republic of
Germany, 4 in France, 2 in the Netherlands, 2 in Spain, 1 in Italy, 1 in
Sweden and 1 in Switzerland. The following table sets forth the issuers of
the Portfolio Securities and Underlying Shares, the country in which each
such issuer is organized and the primary industry in which each such issuer
is engaged:
<TABLE>
<CAPTION>
Company Name Country Industry
- ------------ ------- --------
<S> <C> <C>
The British Petroleum Co., plc United Kingdom Energy
British Telecommunications plc United Kingdom Telecommunications
Cadbury Schweppes plc United Kingdom Beverage
Grand Metropolitan plc United Kingdom Food/Beverage
Hanson plc. United Kingdom Conglomerate
Reuters Holdings plc. United Kingdom Media/Publishing
Unilever plc. United Kingdom Foods
Vodaphone Group plc United Kingdom Telecommunications
Waste Management International plc United Kingdom Pollution Control
Alcatel Alsthom Compagnie Generale
d'Electricite France Telecommunications
Rhone-Poulenc S.A. France Chemicals
Societe Nationale Elf Aquitaine France Energy
Total S.A. France Energy
Bayer A.G. Germany Chemicals
Deutsche Bank A.G. Germany Bank
Hoechst A.G. Germany Chemicals
Siemens A.G. Germany Electrical Equipment
Philips Electronics N.V. Netherlands Electrical Equipment
Royal Dutch Petroleum Company Netherlands Energy
Banco de Santander S.A. Spain Bank
Telefonica de Espana, S.A Spain Telecommunications
Benetton Group S.p.A. Italy Retailing
L.M. Ericsson
Telephone Co., Inc Sweden Telecommunications
Nestle S.A. Switzerland Foods
</TABLE>
A potential investor should review the historical prices of the
securities underlying the Portfolio. The historical prices of such
securities should not be taken as an indication of future performance, and
no assurance can be given that the prices of such securities will increase
sufficiently to cause the beneficial owners of the Securities to receive an
amount in excess of the Minimum Payment at the maturity of the Securities.
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under
an Indenture (the "Senior Indenture"), dated as of April 1, 1983, as
amended and restated, between the Company and Chemical Bank (successor by
merger to Manufacturers Hanover Trust Company), as trustee (the "Trustee").
A copy of the Senior Indenture is filed as an exhibit to the registration
statements relating to the Securities. The following summaries of certain
provisions of the Senior Indenture do not purport to be complete and are
subject to, and qualified in their entirety by reference to, all provisions
of the Senior Indenture, including the definition therein of certain terms.
17
<PAGE>
The Senior Indenture provides that series of Senior Debt
Securities may from time to time be issued thereunder, without limitation
as to aggregate principal amount, in one or more series and upon such terms
as the Company may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior
Debt Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with
all other unsecured and unsubordinated indebtedness of the Company.
However, since the Company is a holding company, the right of the Company,
and hence the right of creditors of the Company (including the Holders of
Senior Debt Securities), to participate in any distribution of the assets
of any subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed
money secured by a pledge, lien or other encumbrance (except for certain
liens specifically permitted by the Senior Indenture) on the Voting Stock
owned directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge
with or into any other corporation, and the Company may sell, lease or
convey all or substantially all of its assets to any corporation, provided
that (i) the corporation (if other than the Company) formed by or resulting
from any such consolidation or merger or which shall have received such
assets shall be a corporation organized and existing under the laws of the
United States of America or a state thereof and shall assume payment of the
principal of (and premium, if any) and interest on the Senior Debt
Securities and the performance and observance of all of the covenants and
conditions of the Senior Indenture to be performed or observed by the
Company, and (ii) the Company or such successor corporation, as the case
may be, shall not immediately thereafter be in default under the Senior
Indenture.
18
<PAGE>
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by
the Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose Holders is required to modify or amend the Indenture;
or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Senior Debt Securities necessary to waive any past default to
less than a majority. No modification or amendment of the Subordinated
Indenture or any Subsequent Indenture for Subordinated Debt Securities may
adversely affect the rights of any holder of Senior Indebtedness without
the consent of such Holder. Except with respect to certain fundamental
provisions, the Holders of at least a majority in principal amount of
Outstanding Senior Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of
Default with respect to Senior Debt Securities of any series: (a) default
in the payment of any interest or Additional Amounts payable on any Senior
Debt Security of that series when due, continued for 30 days; (b) default
in the payment of any principal or premium, if any, on any Senior Debt
Security of that series when due; (c) default in the deposit of any sinking
fund payment, when due, in respect of any Senior Debt Security of that
series; (d) default in the performance of any other covenant of the Company
contained in the Indenture for the benefit of such series or in the Senior
Debt Securities of such series, continued for 60 days after written notice
as provided in the Senior Indenture; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default provided
with respect to Senior Debt Securities of that series. The Trustee or the
Holders of 25% in principal amount of the Outstanding Senior Debt
Securities of that series may declare the principal amount (or such lesser
amount as may be provided for in the Senior Debt Securities of that series)
of all Outstanding Senior Debt Securities of that series and the interest
due thereon and Additional Amounts payable in respect thereof, if any to be
due and payable immediately if an Event of Default with respect to Senior
Debt Securities of such series shall occur and be continuing at the time of
such declaration. At any time after a declaration of acceleration has been
made with respect to Senior Debt Securities of any series but before a
judgment or decree for payment of money due has been obtained by the
Trustee, the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those
due as a result of acceleration) have been made and all Events of Default
have been remedied or waived. Any Event of Default with respect to Senior
Debt Securities of any series may be waived by the Holders of a majority in
principal amount of all Outstanding Senior Debt Securities of that series,
except in a case of failure to pay principal or premium, if any, or
interest or Additional Amounts payable on any Senior Debt Security of that
series for which payment had not been subsequently made or in respect of a
covenant or provision which cannot be modified or amended without the
consent of the Holder of each Outstanding Senior Debt Security of such
series affected.
The Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be
19
<PAGE>
entitled to receive from such Holders reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in complying with any such direction.
The Company is required to furnish to the Trustee annually a
statement as to the fulfillment by the Company of all of its obligations
under the Senior Indenture.
EXPERTS
The consolidated financial statements and related financial
statement schedules of the Company and its subsidiaries included or
incorporated by reference in the Company's 1994 Annual Report on Form 10-K
and incorporated by reference in this Prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
incorporated by reference herein. The Selected Financial Data under the
captions "Operating Results", "Financial Position" and "Common Share Data"
for each of the five years in the period ended December 30, 1994 included
in the 1994 Annual Report to Stockholders of the Company and incorporated
by reference herein, has been derived from consolidated financial
statements audited by Deloitte & Touche LLP, as set forth in their reports
incorporated by reference herein. Such consolidated financial statements
and related financial statement schedules, and such Selected Financial Data
incorporated by reference in this Prospectus and the Registration Statement
of which this Prospectus is a part, have been included or incorporated
herein by reference in reliance upon such reports of Deloitte & Touche LLP
given upon their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
20
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
STOCK MARKET ANNUAL RESET TERM/SM/ NOTES DUE DECEMBER 31, 1999 (SERIES A)
"SMART NOTES/SM/"
----------
On April 29, 1993, Merrill Lynch & Co., Inc. (the "Company") issued
$50,000,000 aggregate principal amount of Stock Market Annual Reset Term
Notes (Series A) due December 31, 1999 (the "Notes" or "SMART Notes"). The Notes
were issued in denominations of $1,000 and integral multiples thereof and will
mature and be repayable at 100% of the principal amount thereof on December 31,
1999. The Notes are not subject to redemption prior to maturity.
The Company will make interest payments on the Notes for each year at a
rate per annum equal to the Participation Rate multiplied by the percent
increase, if any, in the S&P MidCap 400 Composite Stock Price Index as
determined in each year as further described herein (the "Annual Percent
Appreciation"). Annual payments will in no event be less than the Minimum Annual
Payment or more than the Maximum Annual Payment. The table below specifies the
Minimum Annual Payment and the Maximum Annual Payment on a per annum basis per
$1,000 principal amount of Notes as well as the Participation Rate.
Minimum Annual Payment................ $ 30 (3%)
Maximum Annual Payment................ $100 (10%)
Participation Rate.................... 65%
The amounts payable on the December 31, 1993 payment date will be based
on the percentage change in the S&P MidCap 400 Index from April 22, 1993 to
December 21, 1993 (subject to adjustment as described herein) and will be
prorated, as described herein. Interest payments will be payable on June 30 and
December 31 of each year, commencing June 30, 1993 as described below.
For information as to the calculation of the amount payable in any
calendar year, the calculation of the S&P MidCap 400 Index, see "Description of
Notes" and "The Standard & Poor's MidCap 400 Index" in this Prospectus. FOR
OTHER INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE
"SPECIAL CONSIDERATIONS" IN THIS PROSPECTUS.
Ownership of the Notes will be maintained only in book-entry form by or
through the Securities Depository. Beneficial owners of the Notes will not have
the right to receive physical certificates evidencing their ownership except
under the limited circumstances described herein.
The Notes are listed on the New York Stock Exchange under the symbol
"MERIQ 99".
----------
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
This Prospectus has been prepared in connection with the Securities and
is to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Securities.
MLPF&S may act as principal or agent in such transactions. The Securities may
be offered on a national securities exchange in the event the particular issue
of Securities has been listed on such exchange, or off such exchange in
negotiated transactions, or otherwise. Sales will be made at prices related to
prevailing prices at the time of sale. The distribution of the Notes will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
----------
MERRILL LYNCH & CO.
----------
THE DATE OF THIS PROSPECTUS IS , 1995.
/SM/"SMART Notes" and "Stock Market Annual Reset Term" are service marks of
Merrill Lynch & Co., Inc.
<PAGE>
STANDARD & POOR'S CORPORATION ("S&P") DOES NOT GUARANTEE THE ACCURACY
AND/OR THE COMPLETENESS OF THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE COMPANY, MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED, SMITH BARNEY, HARRIS UPHAM & CO. INCORPORATED, HOLDERS OF THE
NOTES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P MIDCAP 400
INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED
UNDER THE LICENSE AGREEMENT DESCRIBED HEREIN OR FOR ANY OTHER USE. S&P
MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH
RESPECT TO THE S&P MIDCAP 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR
ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST
PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Notes made hereby nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Notes shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED
2
<PAGE>
BY REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed
charges, "earnings" consists of earnings from continuing operations before
income taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
3
<PAGE>
SPECIAL CONSIDERATIONS
INTEREST PAYMENTS
If the Ending Annual Value applicable to a December Payment Date does
not exceed the Starting Annual Value applicable to such December Payment
Date by more than approximately 4.62%, beneficial owners of the Notes will
receive only the Minimum Annual Payment on such December Payment Date, even
if the value of the S&P MidCap 400 Index at some point between the
determination of the applicable Starting Annual Value and the determination
of the applicable Ending Annual Value exceeded such Starting Annual Value
by more than approximately 4.62%. The annual amount payable on the Notes
based on the S&P MidCap 400 Index is limited to the Participation Rate
multiplied by the percent increase in such index during the period between
the date of the determination of the applicable Starting Annual Value for
such year and the date of the determination of the applicable Ending Annual
Value for such year, and in no event will such amount exceed the Maximum
Annual Payment. If the Ending Annual Value applicable to a December Payment
Date exceeds the Starting Annual Value applicable to such December Payment
Date by more than approximately 15.38%, the beneficial owners of the Notes
would receive only the Maximum Annual Payment for the applicable payment
period. There will be less time for the S&P MidCap 400 Index to vary during
the time between the determination of the Starting Annual Value and the
Ending Annual Value applicable to calculating the amounts payable on the
December 31, 1993 payment date than the times separating the determination
of such values for purposes of calculating amounts payable on other
December Payment Dates. Although the payment on the December 31, 1993
payment date will be prorated as described under "Description of the Notes-
Interest Payment Dates", the amount payable on the December 31, 1993
payment date if annualized will not be less than the Minimum Annual Payment
or greater than the Maximum Annual Payment.
Beneficial owners of the Notes will receive total annual payments
equal to not less than the Minimum Annual Payment, and will be repaid 100%
of the principal amount of the Notes at maturity. Beneficial owners of
Notes may receive interest payments with respect to the Notes equal to only
the Minimum Annual Payment for each year, and such interest payments are
below what the Company would pay as interest as of the date hereof if the
Company issued non-callable senior debt securities with a similar maturity
as that of the Notes. The payment of additional amounts on the Notes is
subject to the conditions described under "Description of Notes-Interest
Payments". The return of principal of the Notes at maturity and the payment
of the Minimum Annual Payment are not expected to reflect the full
opportunity costs implied by inflation or other factors relating to the
time value of money.
The amount payable on the Notes based on the S&P MidCap 400 Index will
not produce the same return as if the underlying stocks underlying the S&P
MidCap 400 Index were purchased and held for a similar period because of
the following: (i) the S&P MidCap 400 Index does not reflect the payment of
dividends on the stocks underlying it, (ii) the amounts payable on the
Notes do not reflect any changes in the S&P MidCap 400 Index for the period
between the determination of an Ending Annual Value and the determination
of the next succeeding Starting Annual Value, and (iii), the annual amount
payable is limited to 65% of the percentage increase in the S&P MidCap 400
Index during any relevant period, subject to the Minimum Annual Payment and
the Maximum Annual Payment.
TRADING
The Notes are listed on the New York Stock Exchange under the symbol
"MERIQ 99". It is expected that the secondary market for the Notes
(including prices in such market) will likely be affected by the
creditworthiness of the Company and by a number of other factors. It is
possible to view the Notes as the economic equivalent of a debt obligation
plus a series of cash settlement options; however, there can be no
assurance that the Notes will not trade in the secondary market at a
discount from the aggregate value of such economic components, if such
economic components were valued and capable of being traded separately.
4
<PAGE>
The trading values of the Notes may be affected by a number of
interrelated factors, including those listed below. The following is the
expected effect on the trading value of the Notes of each of the factors
listed below. The following discussion of each separate factor generally
assumes that all other factors are held constant, although the actual
interrelationship between certain of such factors is complex.
Relative Level of the S&P MidCap 400 Index. The trading value of
the Notes is expected to depend significantly on the extent of the
appreciation, if any, of the S&P MidCap 400 Index over the Annual
Starting Value applicable to the next succeeding December Payment
Date. If, however, Notes are sold at a time when the S&P MidCap 400
Index exceeds the Annual Starting Value, the sale price may
nevertheless be at a discount from the amount expected to be payable
to the beneficial owner if such excess were to prevail until the next
December Payment Date. Furthermore, the price at which a beneficial
owner will be able to sell Notes prior to a December Payment Date may
be at a discount, which could be substantial, from the principal
amount thereof, if, at such time, the S&P MidCap 400 Index is below,
equal to or not sufficiently above the Annual Starting Value
applicable to such December Payment Date. The value of the Notes may
also be affected by the limitation of the applicable Maximum Annual
Payment.
Volatility of the S&P MidCap 400 Index. If the volatility of the
S&P MidCap 400 Index increases, the trading value of the Notes is
expected to increase. If the volatility of the S&P MidCap 400 Index
decreases, the trading value of the Notes is expected to decrease.
U.S. Interest Rates. In general, if U.S. interest rates increase,
the value of the Notes is expected to decrease. If U.S. interest rates
decrease, the value of the Notes is generally expected to increase.
Interest rates may also affect the U.S. economy, and, in turn, the
level of the S&P MidCap 400 Index. Rising interest rates may lower the
level of the S&P MidCap 400 Index and, thus, the value of the Notes.
Falling interest rates may increase the level of the S&P MidCap 400
Index and, thus, may increase the value of the Notes.
Time Remaining to December Payment Dates. The Notes may trade at
a value above that which may be inferred from the level of U.S.
interest rates and the S&P MidCap 400 Index. This difference will
reflect a "time premium" due to expectations concerning the level of
the S&P MidCap 400 Index during the period prior to each December
Payment Date. As the time remaining to each December Payment Date
decreases, however, this time premium may decrease, thus decreasing
the trading value of the Notes.
Time Remaining to Maturity. As the number of remaining December
Payment Dates decreases, the cumulative value of all the annual rights
to receive an amount that reflects participation in the appreciation
of the S&P MidCap 400 Index above the Starting Annual Value (which
would be realized in interest payments in excess of the Minimum Annual
Payment) will decrease, thus decreasing the value of the Notes.
Furthermore, as the time to maturity decreases, the value of the right
to receive the Minimum Annual Payment and the principal amount is
expected to increase, thus increasing the value of the Note.
Dividend Rates. A number of complex relationships between the
relative values of the Notes and dividend rates are likely to exist.
If dividend rates on the stocks comprising the S&P MidCap 400 Index
increase, the value of the annual right to receive an amount that
reflects participation in the appreciation of the S&P MidCap 400 Index
above the Starting Annual Value is expected to decrease. Consequently
the value of the Notes is expected to decrease. Conversely, if
dividend rates on the stocks comprising the S&P MidCap 400 Index
decrease, the value of the annual right to receive such an amount is
expected to increase and, therefore, the value of the Notes is
expected to increase. However, in general, rising U.S. corporate
dividend rates may increase the S&P MidCap 400 Index and, in turn,
increase the value of the Notes. Conversely, falling U.S. dividend
rates may decrease the S&P MidCap 400 Index and, in turn, decrease the
value of the Notes.
5
<PAGE>
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Notes should reach an investment decision only after carefully considering
the suitability of the Notes in the light of their particular
circumstances.
Investors should also consider the tax consequences of investing in
the Notes and should consult their tax advisors.
DESCRIPTION OF NOTES
GENERAL
The Notes were issued as a series of Senior Debt Securities under the
Senior Indenture, dated as of April 1, 1983, as amended and restated, which
is more fully described below. The Notes will mature, and the principal of
the Notes will be repayable at par, on December 31, 1999.
The Notes are not subject to redemption prior to maturity by the
Company or at the option of any beneficial owner. Upon the occurrence of an
Event of Default with respect to the Notes, however, beneficial owners of
the Notes or the Senior Debt Trustee may accelerate the maturity of the
Notes, as described under "Description of Notes-Events of Default and
Acceleration" and "Other Terms-Events of Default" in this Prospectus.
The Notes were issued in denominations of $1,000 and integral
multiples thereof.
INTEREST PAYMENTS
For each full calendar year, the Company will pay interest in an
amount equal to the following for each $1,000 principal amount of Notes:
$1,000 x Annual Percent Appreciation x Participation Rate
provided, however, that the per annum amount payable as a result of the
foregoing on the Notes will not be less than the Minimum Annual Payment or
greater than the Maximum Annual Payment. The table below specifies the
Minimum Annual Payment and the Maximum Annual Payment on a per annum basis
per $1,000 principal amount of Notes as well as the Participation Rate.
Minimum Annual Payment...... $30 (3%)
Maximum Annual Payment...... $100 (10%)
Participation Rate.......... 65%
The "Annual Percent Appreciation" applicable to the determination of the
amount payable in any year will equal (i) the Ending Annual Value minus the
Starting Annual Value, divided by (ii) the Starting Annual Value. The
"Starting Annual Value" applicable to the determination of the amount
payable in a calendar year will equal the closing value of the S&P MidCap
400 Index on the first NYSE Business Day (as defined herein) in such year
on which a Market Disruption Event has not occurred as determined by State
Street Bank and Trust Company (the "Calculation Agent"); provided, however,
the "Starting Annual Value" applicable to the December 31, 1993 payment
date will equal 160.12 (the closing value of the S&P MidCap 400 Index on
April 22, 1993); and provided further, however, that if a Market Disruption
Event shall have occurred on each of the first ten NYSE Business Days in
any year, the "Starting Annual Value" applicable to the determination of
the amount payable in such year will equal the closing value of the S&P
MidCap 400 Index on such tenth NYSE Business Day regardless of whether a
Market Disruption Event occurs on such day. The "Ending Annual Value"
applicable to the determination of the amount payable in a calendar year
will equal the closing value of the S&P MidCap 400 Index on the seventh
scheduled NYSE Business Day preceding the end of such year (including
December 31 if it is a scheduled NYSE
6
<PAGE>
Business Day) as determined by the Calculation Agent, unless a Market
Disruption Event has occurred on such day. In the event that a Market
Disruption Event has occurred on the seventh scheduled NYSE Business Day
preceding the end of such year, the "Ending Annual Value" applicable to the
determination of the amount payable in such year will equal the closing
value of the S&P MidCap 400 Index on the sixth scheduled NYSE Business Day
preceding the end of such year regardless of whether such day is a NYSE
Business Day or a Market Disruption Event occurs on such day. The
Calculation Agent will determine the seventh scheduled NYSE Business Day,
and, if necessary, the sixth scheduled NYSE Business Day prior to each
December Payment Date.
If the Ending Annual Value applicable to such December Payment Date does
not exceed the Starting Annual Value applicable to such December Payment
Date by more than approximately 4.62%, beneficial owners of the Notes will
receive only the Minimum Annual Payment on such December Payment Date, even
if the value of the S&P MidCap 400 Index at some point between the
determination of the applicable Starting Annual Value and the determination
of the applicable Ending Annual Value exceeded such Starting Annual Value
by more than approximately 4.62%. If the Ending Annual Value applicable to
a December Payment Date exceeds the Starting Annual Value applicable to
such December Payment Date by more than approximately 15.38%, the
beneficial owners of the Notes would receive only the Maximum Annual
Payment for the applicable payment period.
Any day on which a Starting Annual Value or an Ending Annual Value is
required to be calculated is referred to herein as a "Calculation Day". A
"NYSE Business Day" is a day on which The New York Stock Exchange is open
for trading. All determinations made by the Calculation Agent shall be at
the sole discretion of the Calculation Agent and, in the absence of
manifest error, shall be conclusive for all purposes and binding on the
Company and beneficial owners of the Notes. All percentages resulting from
any calculation on the Notes will be rounded to the nearest one hundred-
thousandth of a percentage point, with five one millionths of a percentage
point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to
9.87655% (or .0987655)), and all dollar amounts used in or resulting from
such calculation will be rounded to the nearest cent (with one-half cent
being rounded upwards).
"Market Disruption Event" means either of the following events, as
determined by the Calculation Agent:
(i) the suspension or material limitation (limitations pursuant to New
York Stock Exchange Rule 80A (or any applicable rule or regulation
enacted or promulgated by the New York Stock Exchange, any other self
regulatory organization or the Securities and Exchange Commission of
similar scope as determined by the Calculation Agent) on trading during
significant market fluctuations shall be considered "material" for
purposes of this definition), in each case, for more than two hours of
trading in 80 or more of the securities included in the S&P MidCap 400
Index, or
(ii) the suspension or material limitation, in each case for more than
two hours of trading (whether by reason of movements in price exceeding
levels permitted by the relevant exchange or otherwise), in (A) futures
contracts related to the S&P MidCap 400 Index which are traded on the
Chicago Mercantile Exchange or (B) option contracts related to the S&P
MidCap 400 Index which are traded on the American Stock Exchange.
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange.
INTEREST PAYMENT DATES
The Company will make semiannual interest payments on the Notes on June
30 and December 31 of each year ("June Payment Dates" and "December Payment
Dates", respectively), except as provided below, commencing June 30, 1993,
to the persons in whose names the Notes are registered on the next
preceding June 29 or December 30. For each Note, the Company will pay half
of the Minimum Annual Payment for each calendar year on the June Payment
Date, and will pay the balance of the annual amount payable on such Note
for such year on the December
7
<PAGE>
Payment Date. The amount payable on the June Payment Date in 1993 will
equal $15 per $1,000 principal amount of Notes prorated based on the ratio
of the number of days from and including the original issuance date of the
Notes to but excluding such June Payment Date, computed on the basis of a
year consisting of 360 days of twelve 30-day months, divided by 180.
The amount payable, if any, on the December Payment Date in 1993 that is
in excess of the Minimum Annual Payment will be prorated based on the ratio
of the number of days from and including the date the Notes are issued to
but excluding such December Payment Date, computed on the basis of a year
consisting of 360 days of twelve 30-day months, divided by 360.
Notwithstanding the foregoing, if it is known at least three Business
Days prior to December 31 that December 31 will not be a Business Day, the
amount payable by the Company with respect to a December Payment Date for
Series A Notes will be made on the Business Day immediately preceding such
December 31 to the persons in whose names the Notes are registered on the
second Business Day immediately preceding such December 31.
S&P MIDCAP 400 INDEX
The following table sets forth the S&P MidCap 400 Index values for each
year from 1981 through 1992 as reported by S&P for the first business day
in each such year and for the seventh business day prior to the end of each
such year. The table also sets forth (i) the percent change in the S&P
MidCap 400 Index values between such values for each year, (ii) the per
annum interest that would have been paid on the Notes for each such year
assuming the Notes were outstanding during such year and such values were
deemed a Starting and Ending Annual Value, respectively, and (iii) the
simple rolling average per annum interest that would have been paid on the
Notes during successive seven-year periods assuming the Notes had a
maturity of seven years and matured at the end of the respective years
indicated. The S&P MidCap 400 Index was originally published by S&P on June
19, 1991 and is based on the relative value of the aggregate market value
of the common stocks of 400 companies at any particular time of measurement
as compared to the aggregate average market value of the common stocks of
400 substantially similar companies on December 31, 1990. The following
chart contains values of the S&P MidCap 400 Index prior to June 19, 1991
which were calculated by S&P based only on the values of those companies
originally used by S&P to calculate the S&P MidCap 400 Index on December
31, 1990. If prices for such companies' common stock were not available for
periods prior to June 19, 1991, the calculation of the Index was adjusted
to reflect the deletion of such companies, and no other prices of the
common stock of different companies were substituted. As a result, the
values of the S&P MidCap 400 Index specified below prior to June 19, 1991
are not always based on a sample of 400 companies and in January 1981 the
value of the S&P MidCap Index was based on only 230 companies. The
historical experience of the S&P MidCap 400 Index should not be taken as an
indication of future performance, and no assurance can be given that the
S&P MidCap 400 Index values, during any year in which the Notes are
outstanding, will increase sufficiently to result in a payment in excess of
the Minimum Annual Payment so that the minimum 3% annual rate return would
be payable.
8
<PAGE>
HYPOTHETICAL ANNUAL SMART NOTES PAYMENTS
<TABLE>
<CAPTION>
7-YR.
PRETAX
SIMPLE
S&P S&P ROLLING
MIDCAP 400 MIDCAP 400 HYPOTHETICAL AVERAGE OF
INDEX INDEX S&P ANNUAL HYPOTHETICAL
STARTING ENDING MIDCAP 400 SMART SMART
ANNUAL ANNUAL INDEX % NOTE NOTE
YEAR VALUE(1) VALUE(2) CHANGE(1)(2) PAYMENTS(3) PAYMENTS
- ---- ---------- ------------ ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
1981......... 36.88 37.56 1.84% 3.00%
1982......... 37.67 42.80 13.62% 8.85%
1983......... 43.30 52.29 20.76% 10.00%
1984......... 51.94 50.46 -2.85% 3.00%
1985......... 49.75 65.87 32.40% 10.00%
1986......... 65.15 75.34 15.64% 10.00%
1987......... 75.37 70.27 -6.77% 3.00% 6.84%
1988......... 72.65 81.39 12.03% 7.82% 7.52%
1989......... 81.95 104.54 27.57% 10.00% 7.69%
1990......... 109.44 99.41 -9.16% 3.00% 6.69%
1991......... 99.37 133.89 34.74% 10.00% 7.69%
1992......... 146.18 157.43 7.70% 5.00% 6.97%
Averages..... 6.97% 7.23%
</TABLE>
- ----------
(1) Closing S&P MidCap 400 Index value on the first business day of each
calendar year. Source: S&P.
(2) Closing S&P MidCap 400 Index value on the seventh business day prior to
the end of each calendar year. Source: S&P.
(3) The above hypothetical table assumes a Minimum Annual Payment of $30
per $1,000 principal amount (3% per annum), a Maximum Annual Payment of
$100 per $1,000 principal amount (10.0% per annum) and a Participation Rate
of 65%. The table does not reflect gains or losses in the market value of
SMART Notes which may occur in secondary market trading.
The following tables are an example of hypothetical annual payments on
the Notes using assumed changes in the S&P MidCap 400 Index. The numbers
below are shown for illustrative purposes only and are not intended to
predict either the future levels of the S&P MidCap 400 Index or the
payments to be received on the Notes.
HYPOTHETICAL SMART NOTE PAYMENTS
<TABLE>
<CAPTION>
INDEX HYPOTHETICAL ANNUALIZED
HYPOTHETICAL STARTING HYPOTHETICAL ENDING PERCENT PARTICIPATION SMART
YEAR ANNUAL VALUE(1) ANNUAL VALUE(2) CHANGE RATE NOTE PAYMENT RATE
---- -------------------------- --------------- -------------- ------ ---------------------
<S> <C> <C> <C> <C> <C>
1........... 163 180 10.43% 65% 6.78%(3)
2........... 178 206 15.73% 65% 10.00%**
3........... 208 174 -16.35% 65% 3.00%*
4........... 174 218 25.29% 65% 10.00%**
5........... 217 216 -0.46% 65% 3.00%*
6........... 219 284 29.68% 65% 10.00%**
7........... 283 310 9.54% 65% 6.20%
</TABLE>
- ----------
(1) Assumed closing value of the S&P MidCap 400 Index on the first NYSE
Business Day of each year (or the date of pricing of the Notes for the
first year the Notes are outstanding).
(2) Assumed closing value of the S&P MidCap 400 Index on the seventh
scheduled NYSE Business Day prior to the end of each year.
(3) The Index Percent Change applicable to the December 31, 1993 payment
date will depend upon the increase, if any, in the S&P MidCap 400 Index
from the date the Notes are priced to the date of determination of the
Ending Annual Value in December 1993 and will be prorated as discussed
herein. Assuming the Notes are issued on April 29, 1993, the
Hypothetical Annualized Note Payment Rates for the first year in the
tables above would be prorated by a factor equal to 242/360, the days
remaining until the December Payment Date, computed on the basis of a
year consisting of 360 days of twelve 30-day months, divided by 360. In
the hypothetical example above, the payments per $1,000 principal
amount that would result from this proration for the first year would
be equal to $45.57. See "Description of Notes-Interest Payment Dates".
* Minimum Annual Payment ($30 per $1,000 principal amount (3% per
annum)).
** Maximum Annual Payment ($100 per $1,000 principal amount (10% per
annum)).
9
<PAGE>
The above information is for purposes of illustration only. The actual
amount payable in any year on the Notes will depend entirely on the
Starting Annual Value and Ending Annual Value applicable to such year
determined by the Calculation Agent as provided herein and the Minimum
Annual Payment, Maximum Annual Payment and Participation Rate.
A potential investor should review the historical performance of the S&P
MidCap 400 Index. The historical performance of the S&P MidCap 400 Index
should not be taken as an indication of future performance, and no
assurance can be given that the S&P MidCap 400 Index will increase
sufficiently during any calendar year to cause the beneficial owners of the
Notes to receive an amount in excess of the Minimum Annual Payment during
any such calendar year.
UNAVAILABILITY OF THE S&P MIDCAP 400 INDEX
If S&P discontinues publication of the S&P MidCap 400 Index and S&P or
another entity publishes a successor or substitute index that the
Calculation Agent determines, in its sole discretion, to be comparable to
the S&P MidCap 400 Index (any such index being referred to hereinafter as a
"Successor Index"), then, upon the Calculation Agent's notification of such
determination to the Trustee and the Company, the Calculation Agent will
substitute the Successor Index as calculated by S&P or such other entity
for the S&P MidCap 400 Index and calculate the Starting Annual Value and/or
the Ending Annual Value as described above. Upon any selection by the
Calculation Agent of a Successor Index, the Company shall cause notice
thereof to be published in The Wall Street Journal (or another newspaper of
general circulation) within three Business Days of such selection.
If the S&P MidCap 400 Index is unavailable or S&P discontinues
publication of the S&P MidCap 400 Index and a Successor Index is not
selected by the Calculation Agent or is no longer published on any of the
Calculation Days, the value to be substituted for the S&P MidCap 400 Index
for any such Calculation Day used to calculate the Starting Annual Value or
Ending Annual Value, as the case may be, will be calculated as described
below.
If a Successor Index is selected or the Calculation Agent calculates a
value as a substitute for the S&P MidCap 400 Index as described below, such
Successor Index or value shall be substituted for the S&P MidCap 400 Index
for all purposes.
If at any time the method of calculating the S&P MidCap 400 Index, or the
value thereof, is changed in a material respect, or if the S&P MidCap 400
Index is in any other way modified so that such Index does not, in the
opinion of the Calculation Agent, fairly represent the value of the S&P
MidCap 400 Index had such changes or modifications not been made, then,
from and after such time, the Calculation Agent shall, at the close of
business in New York, New York, on each Calculation Date, make such
adjustments as, in the good faith judgment of the Calculation Agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the S&P MidCap 400 Index as if such changes or modifications
had not been made, and calculate such closing value with reference to the
S&P MidCap 400 Index, as adjusted. Accordingly, if the method of
calculating the S&P MidCap 400 Index is modified so that the value of such
Index is a fraction or a multiple of what it would have been if it had not
been modified (e.g., due to a split in the Index), then the Calculation
Agent shall adjust such Index in order to arrive at a value of the S&P
MidCap 400 Index as if it had not been modified (e.g., as if such split had
not occurred).
If the S&P MidCap 400 Index is unavailable or the publication of the S&P
MidCap 400 Index is discontinued and S&P or another entity does not publish
a Successor Index on any of the Calculation Days, the value to be
substituted for the S&P MidCap 400 Index for any such Calculation Day will
be the value computed by the Calculation Agent for each such Calculation
Day in accordance with the following procedures:
(1) identifying the component stocks of the S&P MidCap 400 Index or
any Successor Index as of the last date on which either of such indices
was calculated by S&P or another entity and published by S&P or such
other entity (each such component stock is a "Last Component Stock");
10
<PAGE>
(2) for each Last Component Stock, calculating as of each such NYSE
Business Day the product of the market price per share and the number of
the then outstanding shares (such product referred to as the "Market
Value" of such stock), by reference to (a) the closing market price per
share of such Last Component Stock as quoted by the New York Stock
Exchange or the American Stock Exchange or any other registered national
securities exchange that is the primary market for such Last Component
Stock, or if no such quotation is available, then the closing market
price as quoted by any other registered national securities exchange or
the National Association of Securities Dealers Automated Quotation
National Market System ("NASDAQ"), or if no such price is quoted, then
the market price from the best available source as determined by the
Calculation Agent (collectively, the "Exchanges") and (b) the most recent
publicly available statement of the number of outstanding shares of such
Last Component Stock;
(3) aggregating the Market Values obtained in clause (2) for all Last
Component Stocks;
(4) ascertaining the Base Value (as defined below under "The Standard
& Poor's MidCap 400 Index-Computation of the S&P MidCap 400 Index") in
effect as of the last day on which either the S&P MidCap 400 Index or any
Successor Index was published by S&P or another entity, adjusted as
described below;
(5) dividing the aggregate Market Value of all Last Component Stocks
by the Base Value (adjusted as aforesaid);
(6) multiplying the resulting quotient (expressed in decimals) by 100.
If any Last Component Stock is no longer publicly traded on any
registered national securities exchange or in the over-the-counter market,
the last available market price per share for such Last Component Stock as
quoted by any registered national securities exchange or in the over-the-
counter market, and the number of outstanding shares thereof at such time,
will be used in computing the last available Market Value of such Last
Component Stock. Such Market Value will be used in all computations of the
S&P MidCap 400 Index thereafter.
If a company that has issued a Last Component Stock and another company
that has issued a Last Component Stock are consolidated to form a new
company, the common stock of such new company will be considered a Last
Component Stock and the common stocks of the constituent companies will no
longer be considered Last Component Stocks. If any company that has issued
a Last Component Stock merges with, or acquires, a company that has not
issued a Last Component Stock, the common stock of the surviving
corporation will, upon the effectiveness of such merger or acquisition, be
considered a Last Component Stock. In each such case, the Base Value will
be adjusted so that the Base Value immediately after such consolidation,
merger or acquisition will equal (a) the Base Value immediately prior to
such event, multiplied by (b) the quotient of the aggregate Market Value of
all Last Component Stocks immediately after such event, divided by the
aggregate Market Value for all Last Component Stocks immediately prior to
such event.
If a company that has issued a Last Component Stock issues a stock
dividend, declares a stock split or issues new shares pursuant to the
acquisition of another company, then, in each case, the Base Value will be
adjusted (in accordance with the formula described below) so that the Base
Value immediately after the time the particular Last Component Stock
commences trading ex-dividend, the effectiveness of the stock split or the
time new shares of such Last Component Stock commence trading equals (a)
the Base Value immediately prior to such event, multiplied by (b) the
quotient of the aggregate Market Value for all Last Component Stocks
immediately after such event, divided by the aggregate Market Value of all
Last Component Stocks immediately prior to such event. The Base Value used
by the Calculation Agent to calculate the value described above will not
necessarily be adjusted in all cases in which S&P, in its discretion, might
adjust the Base Value (as described below under "The Standard & Poor's
MidCap 400 Index-Computation of the S&P MidCap 400 Index").
11
<PAGE>
If S&P discontinues publication of the S&P MidCap 400 Index prior to the
period during which the amount payable with respect to any year is to be
determined and the Calculation Agent determines that no Successor Index is
available at such time, then on each NYSE Business Day until the earlier to
occur of (i) the determination of the amount payable with respect to such
year or (ii) a determination by the Calculation Agent that a Successor
Index is available, the Calculation Agent shall determine the value that
would be used in computing the amount payable with respect to such year by
reference to the method set forth in clauses (1) through (6) in the fourth
preceding paragraph above as if such day were a Calculation Day. The
Calculation Agent will cause notice of each such value to be published not
less often than once each month in the Wall Street Journal (or another
newspaper of general circulation), and arrange for information with respect
to such values to be made available by telephone. Notwithstanding these
alternative arrangements, discontinuance of the publication of the S&P
MidCap 400 Index may adversely affect trading in the Notes.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Notes shall have occurred
and be continuing, the amount payable to a beneficial owner of a Note upon
any acceleration permitted by the Notes, will equal: (i) the principal
amount thereof, plus (ii) an additional amount, if any, of interest
calculated as though the date of early repayment were a December Payment
Date and prorated through such date of early repayment in the same manner
as the amount payable on the December 1993 payment date was prorated, see
"Description of Notes-Interest Payment Dates". If a bankruptcy proceeding
is commenced in respect of the Company, the claim of the beneficial owner
of a Note may be limited, under Section 502(b)(2) of Title 11 of the United
States Code, to the principal amount of the Note plus an additional amount,
if any, of contingent interest calculated as though the date of the
commencement of the proceeding were the maturity date of the Notes.
NOTE DEPOSITORY
Upon issuance, all Notes will be represented by fully registered global
securities (the "Global Securities"). Each such Global Security will be
deposited with, or on behalf of, The Depository Trust Company, as
Securities Depository, registered in the name of the Securities Depository
or a nominee thereof. Unless and until it is exchanged in whole or in part
for Securities in definitive form, no Global Security may be transferred
except as a whole by the Securities Depository to a nominee of such
Securities Depository or by a nominee of such Securities Depository to such
Securities Depository or another nominee of such Securities Depository or
by such Securities Depository or any such nominee to a successor of such
Securities Depository or a nominee of such successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold securities of its
participants ("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 Securities Depository's Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. The Securities Depository is
owned by a number of Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. The Underwriters (as hereinafter defined) are
Participants. Access to the Securities Depository book-entry system is also
available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
Purchases of Notes must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each Note ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written
12
<PAGE>
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Participant or Indirect Participant
through which the Beneficial Owner entered into the transaction. Ownership
of beneficial interests in such Global Security will be shown on, and the
transfer of such ownership interests will be effected only through, records
maintained by the Securities Depository (with respect to interests of
Participants) and on the records of Participants (with respect to interests
of persons held through Participants). The laws of some states may 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 own, transfer or pledge beneficial interests in Global
Securities.
So long as the Securities Depository, or its nominee, is the registered
owner of a Global Security, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the Notes
represented by such Global Security for all purposes under the Senior
Indenture. Except as provided below, Beneficial Owners in a Global Security
will not be entitled to have the Notes represented by such Global
Securities registered in their names, will not receive or be entitled to
receive physical delivery of the Notes in definitive registered form and
will not be considered the owners or Holders thereof under the Senior
Indenture. Accordingly, each Person owning a beneficial interest in a
Global Security must rely on the procedures of the Securities Depository
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 Senior 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 Security desires to give or take any action which a Holder is
entitled to give or take under the Senior Indenture, the Securities
Depository 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. Conveyance of notices and other communications by the Securities
Depository to Participants, by Participants to Indirect Participants, and
by Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Payment of the principal of, and amounts payable on any June Payment Date
or December Payment Date with respect to Notes registered in the name of
the Securities Depository or its nominee, will be made to the Securities
Depository or its nominee, as the case may be, as the Holder of the Global
Securities representing such Notes. None of the Company, the Trustee or any
other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relative to such beneficial ownership
interests. The Company expects that the Securities Depository, upon receipt
of any payment of principal or amounts payable on any June Payment Date or
December Payment Date in respect of a Global Security, will credit the
accounts of the Participants with payment in amounts proportionate to their
respective holdings in principal amount of beneficial interest in such
Global Security as shown on the records of the Securities Depository. The
Company also expects that payments by Participants to Beneficial Owners
will be governed by standing customer instructions and customary practices,
as is now the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility
of such Participants.
If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not
appointed by the Company within 60 days, (y) the Company executes and
delivers to the Trustee a Company Order to the effect that the Global
Securities shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to the Notes, the Global Securities will be
exchangeable for Notes in definitive form of like tenor and of an equal
aggregate principal amount, in denominations of $1,000 and integral
multiples thereof. Such definitive Notes shall be registered in such name
or names as the Securities Depository shall instruct the Trustee. It is
expected that such instructions may be based upon directions received by
the Securities Depository from Participants with respect to ownership of
beneficial interests in such Global Securities.
13
<PAGE>
THE STANDARD & POOR'S MIDCAP 400 INDEX
All disclosure contained in this Prospectus regarding the S&P MidCap 400
Index, including, without limitation, its make-up, method of calculation
and changes in its components, is derived from publicly available
information prepared by S&P. Neither the Company nor MLPF&S take any
responsibility for such information.
GENERAL
The S&P MidCap 400 Index is published by S&P and is intended to provide
an indication of the pattern of price movements of common stocks of
corporations having mid-market capitalization. The calculation of the value
of the S&P MidCap 400 Index (discussed below in further detail) is based on
the relative value of the aggregate Market Value (as defined above) of the
common stocks of 400 companies as of a particular time as compared to the
aggregate average Market Value of the common stocks of 400 substantially
similar companies on December 31, 1990. As of April 16, 1993, 263 (66%) of
the companies included in the S&P MidCap 400 Index were listed on the New
York Stock Exchange, 125 (31%) of the companies were traded in the over-
the-counter market and 12 (3%) of the companies were listed on the American
Stock Exchange. As of February 3, 1993, the aggregate Market Value of the
400 companies included in the S&P MidCap 400 Index represented
approximately 15% of the aggregate Market Value of United States domestic
companies. The 400 companies are not the largest companies listed on The
New York Stock Exchange (the companies included in the Standard & Poor's
500 Composite Stock Price Index, which had a median market capitalization
of $3.1 billion at April 16, 1993, are generally larger than those included
in the S&P MidCap 400 Index, which had a median market capitalization of
$846.8 million at April 16, 1993). S&P chooses companies for inclusion in
the S&P MidCap 400 Index with the aim of achieving (for companies of mid-
market capitalization) a distribution by broad industry groupings that
approximates the distribution of these groupings in the common stock
population of The New York Stock Exchange, which S&P uses as an assumed
model for the composition of the total market with respect to such mid-
market corporations. Relevant criteria employed by S&P in selecting
companies for the S&P MidCap 400 Index include the viability of the
particular company, the extent to which that company represents the
industry group to which it is assigned, the extent to which the market
price of that company's common stock is generally responsive to changes in
the affairs of the respective industry and the Market Value and trading
activity of the common stock of that company.
COMPUTATION OF THE S&P MIDCAP 400 INDEX
S&P currently computes the S&P MidCap 400 Index as of a particular time
as follows:
(1) the Market Value of each component stock is determined as of such
time;
(2) the Market Values of all component stocks as of such time (as
determined under clause (1) above) are aggregated;
(3) the Market Values as of December 31, 1990 (the "Base Period") of
the common stock of each company in a group of 400 substantially similar
companies is determined;
(4) the Market Values of all such common stocks as of the Base Period
(as determined under clause (3) above) are aggregated (such aggregate
amount being referred to as the "Base Value");
(5) the aggregate Market Value of all component stocks as of such time
(as determined under clause (2) above) is divided by the Base Value; and
(6) the resulting quotient (expressed in decimals) is multiplied by
100.
14
<PAGE>
While S&P currently employs the above methodology to calculate the S&P
MidCap 400 Index, no assurance can be given that S&P will not modify or
change such methodology in a manner that may affect the amounts payable on
any December Payment Date to beneficial owners of the Notes.
S&P adjusts the foregoing formula to negate the effect of changes in the
Market Value of a component stock that are determined by S&P to be
arbitrary or not due to true market fluctuations. Such changes may result
from such causes as the issuance of stock dividends, the granting to
shareholders of rights to purchase additional shares of such stock, the
purchase of additional shares of stock by employees pursuant to employee
benefit plans, certain consolidations and acquisitions, the granting to
shareholders of rights to purchase other securities of the company, the
substitution by S&P of particular component stocks in the S&P MidCap 400
Index and other reasons. In all such cases, S&P first recalculates the
aggregate Market Value of all component stocks (after taking account of the
new market price per share of the particular component stock or the new
number of outstanding shares thereof or both, as the case may be) and then
determines the New Base Value in accordance with the following formula:
New Market Value
Old Base Value x ________________ = New Base Value
Old Market Value
The result is that the Base Value is adjusted in proportion to any change
in the aggregate Market Value of all component stocks resulting from the
causes referred to above to the extent necessary to negate the effects of
such causes upon the S&P MidCap 400 Index.
LICENSE AGREEMENT
S&P and Merrill Lynch Capital Services, Inc. have entered into a non-
exclusive license agreement providing for the license to Merrill Lynch
Capital Services, Inc., in exchange for a fee, of the right to use indices
owned and published by S&P in connection with certain securities, including
the Notes, and the Company is an authorized sublicensee thereof.
The license agreement between S&P and Merrill Lynch Capital Services,
Inc. provides that the following language must be stated in this
Prospectus:
"The Notes are not sponsored, endorsed, sold or promoted by S&P. S&P
makes no representation or warranty, express or implied, to the Holders
of the Notes or any member of the public regarding the advisability of
investing in securities generally or in the Notes particularly or the
ability of the S&P MidCap 400 Index to track general stock market
performance. S&P's only relationship to Merrill Lynch Capital Services,
Inc. and the Company (other than transactions entered into in the
ordinary course of business) is the licensing of certain service marks
and trade names of S&P and of the S&P MidCap 400 Index which is
determined, composed and calculated by S&P without regard to the Company
or the Notes. S&P has no obligation to take the needs of the Company or
the Holders of the Notes into consideration in determining, composing or
calculating the S&P MidCap 400 Index. S&P is not responsible for and has
not participated in the determination of the timing of the sale of the
Notes, prices at which the Notes are to initially be sold, or quantities
of the Notes to be issued or in the determination or calculation of the
equation by which the Notes are to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing
or trading of the Notes."
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
15
<PAGE>
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities may
from time to time be issued thereunder, without limitation as to aggregate
principal amount, in one or more series and upon such terms as the Company
may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Senior Indenture) on the Voting Stock owned
directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all
or substantially all of its assets to any corporation, provided that (i)
the corporation (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received such assets shall
be a corporation organized and existing under the laws of the United States
of America or a state thereof and shall assume payment of the principal of
(and premium, if any) and interest on the Senior Debt Securities and the
performance and observance of all of the covenants and conditions of the
Senior
16
<PAGE>
Indenture to be performed or observed by the Company, and (ii) the Company
or such successor corporation, as the case may be, shall not immediately
thereafter be in default under the Senior Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose Holders is required to modify or amend the Indenture;
or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Senior Debt Securities necessary to waive any past default to
less than a majority. No modification or amendment of the Subordinated
Indenture or any Subsequent Indenture for Subordinated Debt Securities may
adversely affect the rights of any holder of Senior Indebtedness without
the consent of such Holder. Except with respect to certain fundamental
provisions, the Holders of at least a majority in principal amount of
Outstanding Senior Debt Securities of any series may, with respect to such
series, waive past defaults under the Indenture and waive compliance by the
Company with certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default with
respect to Senior Debt Securities of any series: (a) default in the payment
of any interest or Additional Amounts payable on any Senior Debt Security
of that series when due, continued for 30 days; (b) default in the payment
of any principal or premium, if any, on any Senior Debt Security of that
series when due; (c) default in the deposit of any sinking fund payment,
when due, in respect of any Senior Debt Security of that series; (d)
default in the performance of any other covenant of the Company contained
in the Indenture for the benefit of such series or in the Senior Debt
Securities of such series, continued for 60 days after written notice as
provided in the Senior Indenture; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default provided
with respect to Senior Debt Securities of that series. The Trustee or the
Holders of 25% in principal amount of the Outstanding Senior Debt
Securities of that series may declare the principal amount (or such lesser
amount as may be provided for in the Senior Debt Securities of that series)
of all Outstanding Senior Debt Securities of that series and the interest
due thereon and Additional Amounts payable in respect thereof, if any to be
due and payable immediately if an Event of Default with respect to Senior
Debt Securities of such series shall occur and be continuing at the time of
such declaration. At any time after a declaration of acceleration has been
made with respect to Senior Debt Securities of any series but before a
judgment or decree for payment of money due has been obtained by the
Trustee, the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those
due as a result of acceleration) have been made and all Events of Default
have been remedied or waived. Any Event of Default with respect to Senior
Debt Securities of any series may be waived by the Holders of a majority in
principal amount of all Outstanding Senior Debt Securities of that series,
except in a case of failure to pay principal or premium, if any, or
interest or Additional Amounts payable on any Senior Debt Security of that
series for which payment had not been subsequently made or in respect of a
covenant or provision which cannot be modified or amended without the
consent of the Holder of each Outstanding Senior Debt Security of such
series affected.
The Holders of a majority in principal amount of the Outstanding Senior
Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any
17
<PAGE>
trust or power conferred on the Trustee with respect to Senior Debt
Securities of such series, provided that such direction shall not be in
conflict with any rule of law or the Senior Indenture. Before proceeding
to exercise any right or power under the Senior Indenture at the direction
of such Holders, the Trustee shall be entitled to receive from such Holders
reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a statement as
to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
18
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
JAPAN INDEX/SM/
EQUITY PARTICIPATION SECURITIES WITH MINIMUM RETURN PROTECTION
DUE JANUARY 31, 2000
------------
On January 27, 1994, Merrill Lynch & Co., Inc. (the "Company") issued
$115,000,000 aggregate principal amount of Japan Index Equity Participation
Securities with Minimum Return Protection due January 31, 2000 (the
"Securities", or the "Notes") in denominations of $1,000 and integral multiples
thereof. As of the date of this Prospectus, $80,000,000 aggregate principal
amount of the Securities remains outstanding. The Securities will mature on
January 31, 2000. At maturity, a beneficial owner of a Security will be entitled
to receive, with respect to each Security, the principal amount thereof plus an
interest payment (the "Supplemental Redemption Amount") based on the percentage
increase, if any, in the Index (as hereinafter defined). The Securities were
issued as a series of Senior Debt Securities under the Senior Indenture
described herein. The Securities are not redeemable or callable by the Company
prior to maturity. While at maturity a beneficial owner of a Security will
receive the principal amount of such Security plus the Supplemental Redemption
Amount, there will be no payment of interest, periodic or otherwise.
The Supplemental Redemption Amount payable with respect to a Security at
maturity will equal the product of (A) the principal amount of the applicable
Security, (B) the percentage change from 195.46, the closing value of the Index
on January 20, 1994 as compared to the Final Average Value (as hereinafter
defined), and (C) 115% (the "Participation Rate"). In no event, however, will
the Supplemental Redemption Amount be less than $150 per $1,000 principal amount
of the Securities (the "Minimum Supplemental Redemption Amount"), representing a
minimum annualized rate of return of 2.33%. The calculation of the Final Average
Value, as more fully described herein, will equal the arithmetic average of the
closing values of the Index on certain days during January of 1998, 1999 and
2000. Although the Index will initially be the Japan Index (as defined herein),
under certain circumstances described herein, a New Japan Index (as defined
herein) may be substituted for the Japan Index. The Japan Index (or, if such
substitution shall occur, the New Japan Index) is referred to herein as the
"Index".
For information as to the calculation of the Supplemental Redemption Amount
which will be paid at maturity and the calculation and the composition of the
Index, see "Description of Securities" and "The Index" respectively in this
Prospectus. For other information that should be considered by prospective
investors, see "Special Considerations" in this Prospectus.
Ownership of the Securities is maintained in book-entry form by or through
the Depository (as hereinafter defined). Beneficial owners of the Securities do
not have the right to receive physical certificates evidencing their ownership
except under the limited circumstances described herein.
The Securities are listed on the American Stock Exchange under the symbol
"MJP.A."
------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------
This Prospectus has been prepared in connection with the Securities and is
to be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Securities.
MLPF&S may act as principal or agent in such transactions. The Securities may
be offered on a national securities exchange in the event the particular issue
of Securities has been listed on such exchange, or off such exchange in
negotiated transactions, or otherwise. Sales will be made at prices related to
prevailing prices at the time of sale. The distribution of the Securities will
conform to the requirements set forth in the applicable sections of Schedule E
to the By-Laws of the National Association of Securities Dealers, Inc.
------------
MERRILL LYNCH & CO.
------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1995.
/SM/"Japan Index" is a service mark of The American Stock Exchange.
<PAGE>
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Securities made hereby nor has
the Commissioner passed upon the accuracy or adequacy of this Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Notes shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
Investors should be aware that if the Final Average Value of the Index
does not exceed the Initial Value by more than approximately 13.04%,
beneficial owners of the Securities will receive only the principal amount
thereof and the Minimum Supplemental Redemption Amount. A beneficial owner
of the Securities may receive a Supplemental Redemption Amount equal only
to the Minimum Supplemental Redemption Amount at maturity, and such Minimum
Supplemental Redemption Amount is below what the Company would pay as
interest as of the date hereof if the Company issued non-callable senior
debt securities with a similar maturity as that of the Securities. The
return of principal of the Securities at maturity and the payment of the
Minimum Supplemental Redemption Amount are not expected to reflect the full
opportunity costs implied by inflation or other factors relating to the
time value of money.
3
<PAGE>
The Index does not reflect the payment of dividends on the stocks
underlying it and therefore, in addition to the considerations regarding
averaging discussed below, the yield based on the Index to the maturity of
the Securities will not produce the same yield as if such underlying stocks
were purchased and held for a similar period. Because the Final Average
Value will be based upon average values of the Index during specified
periods in three successive years, a significant increase in the Index as
measured by the average values during the specified period in the final
year, or in either earlier year, may be substantially or entirely offset by
the average values of the Index during the specified periods in the other
two years.
The Index used to calculate the Supplemental Redemption Amount will
initially be the Japan Index, which is currently calculated and published
by the American Stock Exchange. Upon the occurrence of certain events
described under "Description of Securities-Substitution of the Index", a
New Japan Index (which will also relate to the trading of equity securities
in Japan) will be substituted for the Japan Index as the basis of the
calculation of the Supplemental Redemption Amount. The required
characteristics of such New Japan Index are described herein; however, the
New Japan Index does not currently exist, and such New Japan Index may be
calculated and published by a United States stock exchange other than the
American Stock Exchange. In the event that a New Japan Index is substituted
for the Japan Index, no assurance can be given as to whether the
Supplemental Redemption Amount calculated on the basis of such New Japan
Index will be more than or less than or equal to the Supplemental
Redemption Amount which would have been payable had such substitution not
occurred.
The Indenture provides that the Indenture and the Securities will be
governed by and construed in accordance with the laws of New York. Under
present New York law the maximum rate of interest is 25% per annum on a
simple interest basis. This limit may not apply to Securities in which
$2,500,000 or more has been invested. While the Company believes that New
York law would be given effect by a state or Federal court sitting outside
of New York, state laws frequently regulate the amount of interest that may
be charged to and paid by a borrower (including, in some cases, corporate
borrowers). All payments under the Securities (other than the return of
principal) could be considered interest for the purpose of state usury
laws. The Company will covenant for the benefit of the Holders of the
Securities, to the extent permitted by law, not to claim voluntarily the
benefits of any laws concerning usurious rates of interest against a Holder
of the Securities.
TRADING
The Securities are listed on the American Stock Exchange. It is expected
that the secondary market for the Securities will be affected by the
creditworthiness of the Company and by a number of other factors. Because
the Final Average Value is an average of the three Calculation Values as
described below, the price at which a beneficial owner of a Security will
be able to sell such Security in the secondary market may be at a discount
if the first or second such Calculation Value is below the Initial Value.
The trading value of the Securities is expected to depend primarily on
the extent of the appreciation, if any, of the Index over the Initial
Value. If, however, Securities are sold prior to the maturity date at a
time when the Index exceeds the Initial Value, the sale price may be at a
discount from the amount expected to be payable to the beneficial owner if
such excess of the Index over the Initial Value were to prevail until
maturity of the Securities because of the possible fluctuation of the Index
between the time of such sale and the maturity date and the effect of the
value of the Index on prior days used to calculate the Final Average Value,
if any. Furthermore, the price at which a beneficial owner will be able to
sell Securities prior to maturity may be at a discount, which could be
substantial, from the principal amount thereof if, at such time, the Index
is below, equal to or not sufficiently above the Initial Value and/or if
the value of the Index on prior days used to calculate the Final Average
Value, if any, was below, equal to or not sufficiently above the Initial
Value. A discount could also result from rising interest rates in the U.S.
The trading values of the Securities may be affected by a number of
interrelated factors, including the creditworthiness of the Company and
those factors listed below. The relationship among these factors is
complex, including how these factors affect the relative value of the
principal amount of the Securities to be repaid at maturity
4
<PAGE>
and the value of the Supplemental Redemption Amount. Accordingly, investors
should be aware that factors other than the level of the Index are likely
to affect the Securities' trading value. The expected theoretical effect on
the trading value of the Securities of each of the factors listed below,
assuming in each case that all other factors are held constant, is as
follows:
Interest Rates. In general, if U.S. interest rates increase, the value
of the Securities is expected to decrease. If U.S. interest rates
decrease, the value of the Securities is expected to increase. In
general, if Japanese interest rates increase, the value of the Securities
is expected to increase. If Japanese interest rates decrease, the value
of the Securities is expected to decrease. Interest rates may also affect
the Japanese economy, and, in turn, the value of the Index. Rising
interest rates may lower the value of the Index and, thus, the
Securities. Falling interest rates may increase the value of the Index
and, thus, may increase the value of the Securities.
Volatility of the Index. If the volatility of the Index increases, the
trading value of the Securities is expected to increase. If the
volatility of the Index decreases, the trading value of the Securities is
expected to decrease.
Time Remaining to Maturity. The Securities may trade at a value above
that which may be inferred from the level of interest rates and the
Index. This difference will reflect a "time premium" due to expectations
concerning the value of the Index during the period prior to maturity of
the Securities. As the time remaining to maturity of the Securities
decreases, however, this time premium is expected to decrease, thus
decreasing the trading value of the Securities. In addition, the price at
which a beneficial owner may be able to sell Securities prior to maturity
may be at a discount, which may be substantial, from the minimum expected
value at maturity if one or more Calculation Values, as defined below,
were below, equal to or not sufficiently above the Initial Value.
Dividend Rates in Japan. If dividend rates on the stocks comprising
the Index increase, the value of the Securities is expected to decrease.
Conversely, if dividend rates on the stocks comprising the Index
decrease, the value of the Securities is expected to increase. However,
in general, rising Japanese corporate dividend rates may increase the
value of the Index and, in turn, increase the value of the Securities.
Conversely, falling Japanese dividend rates may decrease the value of the
Index and, in turn, decrease the value of the Securities.
Although the stocks comprising the Japan Index are traded in Japanese yen
and the Securities are denominated in U.S. dollars, the Supplemental
Redemption Amount will not be adjusted for the currency exchange rate in
effect at the maturity of the Securities. The Supplemental Redemption
Amount is based upon the percentage increase in the Japan Index. The Japan
Index is calculated using a constant U.S.$/Japanese Yen exchange rate. The
value of the Securities should not, therefore, be directly affected by the
currency exchange rate. For example, if the Japan Index were to increase by
25% from the Initial Value to the Final Average Value, a holder of the
Securities would receive a Supplemental Redemption Amount equal to $287.50
per $1,000 principal amount of Securities at maturity regardless of the
U.S.$/Japanese Yen exchange rate prevailing at maturity. Changes in the
exchange rate, however, may reflect changes in the Japanese economy which,
of course, would affect the value of the Index and the Securities.
THE JAPANESE MARKET
The underlying stocks that constitute the Japan Index have been issued by
Japanese companies. If a New Japan Index is substituted for the Japan
Index, such New Japan Index would also be based upon stocks issued by
Japanese companies. Investments in securities indexed to the value of
Japanese equity securities involve certain risks. The Japanese securities
markets may be more volatile than U.S. or other securities markets and may
be affected by market developments in different ways than U.S. or other
securities markets. Direct or indirect government intervention to stabilize
the Japanese securities markets and cross-shareholdings in Japanese
companies on such markets may affect prices and volume of trading on those
markets. Also, there is generally less publicly available information about
Japanese companies than about those U.S. companies that are subject to the
reporting requirements of the U.S. Securities and Exchange Commission, and
Japanese companies are subject to accounting,
5
<PAGE>
auditing and financial reporting standards and requirements that differ
from those to which U.S. reporting companies are subject.
Securities prices in Japan are subject to political, economic, financial
and social factors that apply in Japan. These factors (including the
possibility that recent or future changes in the Japanese government's
economic and fiscal policies, the possible imposition of, or changes in,
currency exchange laws or other Japanese laws or restrictions applicable to
Japanese companies or investments in Japanese equity securities and the
possibility of fluctuations in the rate of exchange between currencies)
could negatively affect the Japanese securities markets. Moreover, the
Japanese economy may differ favorably or unfavorably from the U.S. economy
in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resources and self-sufficiency.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully
considering the suitability of the Securities in light of their particular
circumstances.
Investors should also consider the tax consequences of investing in the
Securities and should consult their tax advisors.
DESCRIPTION OF SECURITIES
GENERAL
The Securities were issued as a series of Senior Debt Securities under
the Senior Indenture, dated as of April 1, 1983, as amended and restated,
which is more fully described below. The Securities will mature on January
31, 2000.
While at maturity a beneficial owner of a Security will receive the
principal amount of such Security plus the Supplemental Redemption Amount,
there will be no payment of interest, periodic or otherwise. (See "Payment
at Maturity", below.)
The Securities are not subject to redemption by the Company or at the
option of any beneficial owner prior to maturity. Upon the occurrence of an
Event of Default with respect to the Securities, beneficial owners of the
Securities may accelerate the maturity of the Securities, as described
under "Description of Securities-Events of Default and Acceleration" and
"Other Terms-Events of Default" in this Prospectus.
The Securities were issued in denominations of $1,000 and integral
multiples thereof.
PAYMENT AT MATURITY
At maturity, a beneficial owner of a Security will be entitled to receive
the principal amount thereof plus a Supplemental Redemption Amount, all as
provided below. If the Final Average Value of the Index does not exceed the
Initial Value by more than approximately 13.04% a beneficial owner of a
Security will be entitled to receive only the principal amount thereof and
the Minimum Supplemental Redemption Amount. Although the Index will
initially be the Japan Index, under certain circumstances described herein
a New Japan Index (as defined herein) may be substituted for the Japan
Index. The Japan Index (or, if such substitution shall occur, the New Japan
Index) is referred to herein as the "Index".
6
<PAGE>
At maturity, a beneficial owner of a Security will be entitled to
receive, with respect to each such Security, (i) the principal amount
thereof, and (ii) the Supplemental Redemption Amount equal in amount to:
Principal Amount X Final Average Value-Initial Value X 115%
---------------------------------
Initial Value
provided, that the Supplemental Redemption Amount will not be less than the
Minimum Supplemental Redemption Amount of $150 per $1,000 principal amount
of Securities. The Initial Value equals 195.46, the closing value of the
Japan Index on January 20, 1994; provided, however, that a new Initial
Value will be calculated as described herein if a New Japan Index is
substituted for the Japan Index.
The Final Average Value of the Index will be determined by State Street
Bank and Trust Company (the "Calculation Agent") and will equal the
arithmetic average (mean) of the Yearly Values, as defined below, for 1998,
1999 and 2000. The Yearly Value for any year will be calculated during the
Calculation Period for such year which will be from and including January
22 in 1998, January 21 in 1999 and January 20 in 2000 to and including the
fifth scheduled Business Day after each such date. The Yearly Value for
each year will equal the arithmetic average (mean) of the closing values of
the Index on the first Business Day in the applicable Calculation Period
(provided that a Market Disruption Event, as defined below, shall not have
occurred on such day) and on each succeeding Business Day (provided that a
Market Disruption Event shall not have occurred on the applicable day) up
to and including the last Business Day in the applicable Calculation Period
(each, a "Calculation Date") until the Calculation Agent has so determined
such closing values for five Business Days. If a Market Disruption Event
occurs on two or more of the Business Days during a Calculation Period, the
Yearly Value for the relevant year will equal the average of the values on
Business Days on which a Market Disruption Event did not occur during such
Calculation Period or, if there is only one such Business Day, the value on
such day. If a Market Disruption Event occurs on all of such Business Days
during a Calculation Period, the Yearly Value for the relevant year shall
equal the closing value of the Index on the last Business Day of the
Calculation Period regardless of whether a Market Disruption Event shall
have occurred on such day. A Yearly Value may be restated if the
Substitution Event occurs after the determination of such Yearly Value, see
"Substitution of the Index".
For purposes of determining the Final Average Value, a "Business Day" is
a day on which the Relevant Stock Exchange is open for trading. "Relevant
Stock Exchange" means the AMEX or, if a New Japan Index has been
substituted for the Japan Index, the U.S. stock exchange that publishes
such New Japan Index. All determinations made by the Calculation Agent
shall be at the sole discretion of the Calculation Agent and, absent a
determination by the Calculation Agent of a manifest error, shall be
conclusive for all purposes and binding on the Company and beneficial
owners of the Securities.
The following table illustrates, for a range of hypothetical Final
Average Values and assuming a Participation Rate of 115%, an Initial Value
equal to 195.46, a Minimum Supplemental Redemption Amount equal to $150 per
$1,000 principal amount of the Securities and no change in foreign exchange
rates between Japan and the United States, (i) the total amount payable at
maturity for each $1,000 principal amount of Securities, (ii) the pretax
annualized rate of return to beneficial owners of Securities, and (iii) the
pretax annualized rate of return of an investment in the stocks underlying
the Japan Index (which includes an assumed aggregate dividend yield of .77%
per annum, as more fully described below).
7
<PAGE>
<TABLE>
TOTAL PRETAX PRETAX ANNUALIZED
HYPOTHETICAL FINAL PERCENTAGE AMOUNT ANNUALIZED RATE OF RATE OF RETURN OF
AVERAGE VALUE OF CHANGE OVER PAYABLE AT RETURN ON THE STOCKS UNDERLYING THE
THE JAPAN INDEX INITIAL VALUE MATURITY SECURITIES(1) JAPAN INDEX(1)(2)
- ------------------------ -------------- ---------- --------------------- -------------------------
<S> <C> <C> <C> <C>
97.73 -50% $1,150 2.33% -10.43%
117.28 -40% $1,150 2.33% -7.55%
136.82 -30% $1,150 2.33% -5.08%
156.37 -20% $1,150 2.33% -2.91%
175.91 -10% $1,150 2.33% -.98%
195.46(3) 0% $1,150 2.33% .77%
215.01 10% $1,150 2.33% 2.36%
234.55 20% $1,230 3.47% 3.83%
254.10 30% $1,345 4.98% 5.19%
273.64 40% $1,460 6.38% 6.46%
293.19 50% $1,575 7.68% 7.65%
312.74 60% $1,690 8.90% 8.77%
332.28 70% $1,805 10.05% 9.83%
351.83 80% $1,920 11.13% 10.83%
371.37 90% $2,035 12.15% 11.78%
390.92 100% $2,150 13.12% 12.69%
410.47 110% $2,265 14.04% 13.56%
430.01 120% $2,380 14.92% 14.39%
</TABLE>
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis and assume the
Securities are held until maturity.
(2) This rate of return assumes (i) an investment of a fixed amount in the
stocks underlying the Japan Index with the allocation of such amount
reflecting the relative weights of such stocks in the Japan Index; (ii)
a percentage change in the aggregate price of such stocks that equals
the percentage change in the Japan Index from the Initial Value to the
relevant Final Average Value; (iii) a constant dividend yield of .77%
per annum, paid quarterly from the date of initial delivery of
Securities, applied to the value of the Japan Index at the end of each
such quarter assuming such value increases or decreases linearly from
195.46 to the applicable hypothetical Final Average Value; (iv) no
transaction fees or expenses; (v) a maturity for the Securities of six
years and eleven days; and (vi) a final Japan Index value equal to the
Final Average Value. The aggregate dividend yield of the stocks
underlying the Japan Index as of January 20, 1994 was approximately
.77%.
(3) The value of Japan Index on January 20, 1994.
The above figures are for purposes of illustration only. The actual total
redemption amount received by investors and the pretax annualized rate of
return resulting therefrom will depend entirely on the actual Final Average
Value determined by the Calculation Agent as provided herein. Because the
Final Average Value will be based upon average values of the Index (which
may be a New Japan Index substituted for the Japan Index) during specified
periods in three successive years, a significant increase or decrease in
the Index as measured by the average values during the specified period in
any year may be substantially or entirely offset by the average values of
the Index during the specified periods in the other two years.
A potential investor should review the historical performance of the
Japan Index. The historical performance of the Japan Index should not be
taken as an indication of future performance, and no assurance can be given
that the Japan Index will increase sufficiently to cause the beneficial
owners of the Securities to receive an amount in excess of the principal
amount and the Minimum Supplemental Redemption Amount at the maturity of
the Securities.
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENT
If at any time the method of calculating the Index, or the value thereof,
is changed in a material respect, or if the Index is in any other way
modified so that such Index does not, in the opinion of the Calculation
Agent, fairly
8
<PAGE>
represent the value of the Index had such changes or modifications not been
made, then, from and after such time, the Calculation Agent shall, at the
close of business in New York, New York, on each date that the closing
value with respect to the Final Average Value is to be calculated, make
such adjustments as, in the good faith judgment of the Calculation Agent,
may be necessary in order to arrive at a calculation of a value of a stock
index comparable to the Index as if such changes or modifications had not
been made, and calculate such closing value with reference to the Index, as
adjusted. Accordingly, if the method of calculating the Index is modified
so that the value of such Index is a fraction or a multiple of what it
would have been if it had not been modified (e.g., due to a split in the
Index), then the Calculation Agent shall adjust such Index in order to
arrive at a value of the Index as if it had not been modified (e.g., as if
such split had not occurred).
"Market Disruption Event" means the occurrence or existence of either of
the following events on a Business Day during a Calculation Period as
determined by the Calculation Agent:
(i) a suspension or absence of trading on the TSE of 20% or more of
the Underlying Stocks which then comprise the Index or a Successor Index
during the one-half hour period preceding the close of trading on the
TSE; or
(ii) the suspension or material limitation on the Singapore
International Monetary Exchange Ltd. (the "SIMEX"), Osaka Securities
Exchange (the "OSE") or the Relevant Stock Exchange or any other major
securities market of trading in futures or options contracts related to
the Index during the one-half hour period preceding the close of trading
on the applicable exchange.
For purposes of determining whether a Market Disruption Event has
occurred: (1) a limitation on the hours or number of days of trading will
not constitute a Market Disruption Event if it results from an announced
change in the regular business hours of the relevant exchange, (2) a
decision to permanently discontinue trading in the relevant contract will
not constitute a Market Disruption Event, (3) a suspension of trading in a
futures or options contract on the Index by the Relevant Stock Exchange or
other major securities market by reason of (x) a price change exceeding
limits set by the Relevant Stock Exchange or such securities market, (y) an
imbalance of orders relating to such contracts or (z) a disparity in bid
and ask quotes relating to such contracts will constitute a suspension or
material limitation of trading in futures or options contracts related to
the Index and (4) an "absence of trading" on the SIMEX, OSE, the Relevant
Stock Exchange or a major securities market on which futures or options
contracts related to the Index are traded will not include any time when
the SIMEX, OSE, the Relevant Stock Exchange or such securities market, as
the case may be, itself is closed for trading under ordinary circumstances.
SUBSTITUTION OF THE INDEX
Movements in the Japan Index correspond generally to movements in the
Nikkei 225 Index published by Nihon Keizai Shimbun, Inc., which is
currently the most widely utilized index relating to Japanese equity
securities, as measured by trading volume and open interest relating to the
futures contract on such index (the "Nikkei 225 Futures Contract"). In
October of 1993, Nihon Keizai Shimbun, Inc. commenced the calculation and
publication of a new broad-based, capitalization-weighted index referred to
as the Nikkei 300 Index (the "Nikkei 300 Index"). Unlike the Nikkei 225
Index, which is a price-weighted index of 225 Japanese companies listed in
the First Section of the TSE, the Nikkei 300 Index is a capitalization-
weighted index of 300 Japanese companies listed in the First Section of the
TSE. See "The Index-The New Japan Index" for a description of the Nikkei
300 Index. The OSE announced that, if a broad-based, capitalization-
weighted index were introduced on the TSE, the OSE expected to establish a
new futures contract on such index. Although the OSE has not as of the date
of this Prospectus Supplement introduced a new futures contract on the
Nikkei 300 Index, any such contract which it may introduce at some future
date is referred to herein as the "Nikkei 300 Futures Contract".
If the Nikkei 300 Futures Contract is introduced and publicly traded on
an exchange in Japan, and such contract develops trading volume and open
interest exceeding that of the Nikkei 225 Futures Contract, the Company
believes this would indicate that the Nikkei 300 Futures Contract will have
become more widely utilized than the Nikkei 225
9
<PAGE>
Futures Contract. Therefore, in the event that a Nikkei 300 Futures
Contract is publicly traded at some future date on an exchange in Japan and
each of the additional conditions described below are fulfilled (the
occurrence of all such conditions being referred to herein as a
"Substitution Event"), a New Japan Index (as defined below) will be
substituted for the Japan Index. From and after such time, the Index used
to determine the Supplemental Redemption Amount with respect to the Notes
will be such New Japan Index. Upon the substitution of the New Japan Index
for the Japan Index, the Company will cause notice thereof to be given to
Holders of the Notes. Such notice will also state that, for purposes of
calculating the Supplemental Redemption Amount, an adjusted Initial Value
will be substituted for the original Initial Value. Such adjusted Initial
Value will be calculated as follows:
Initial Value of Japan Index x current value of New Japan Index
--------------------------------------
current value of Japan Index
where the current values of the Japan Index and of the New Japan Index will
equal their respective levels reported by the relevant exchange at the
close of business on the day that the Calculation Agent substitutes the New
Japan Index for the Japan Index. If the Substitution Event occurs after the
determination of a Yearly Value, any such Yearly Value will be restated in
terms of the New Japan Index pursuant to the following formula:
Yearly Value prior to restatement x adjusted Initial Value
---------------------------------
original Initial Value
The Supplemental Redemption Amount will then be calculated using such
restated Yearly Value.
A "Substitution Event" will have occurred if, as determined by the
Calculation Agent (whose opinion shall be conclusive and binding on the
Company and on the holders of the Notes), the following conditions are
fulfilled:
(a) Nikkei 300 Futures Contracts shall be introduced and publicly
traded on an exchange in Japan; and
(b) The AMEX or another United States securities exchange publishes
(on a basis not less regularly than each day on which such exchange and
the TSE are open for trading) an index (the "New Japan Index") which:
(i) for a period of 90 days immediately preceding the date of the
Substitution Event has a correlation based on daily, closing value to
closing value, percentage changes of not less than 90% with the Nikkei
300 Index (during the 90 days immediately preceding the date of this
Prospectus Supplement, the Japan Index had a correlation of
approximately 99% with the Nikkei 225 Index); and
(ii) an option, warrant or other security which has payments
determined by reference to the New Japan Index has been approved to be
listed on a national securities exchange by the Securities and
Exchange Commission; and
(c) Either of the following has occurred:
(i) the Nikkei 225 Index is no longer published and/or the Nikkei
225 Futures have been delisted from trading on the OSE; or
(ii) the Nikkei 300 Futures Contracts publicly traded on exchanges
in Japan have (A) greater average daily volume and (B) greater average
daily open interest than the Nikkei 225 Futures Contracts which trade
on the OSE, each for any three-month period prior to the date of the
Substitution Event, commencing on a futures expiration date on the OSE
and ending on the following futures expiration date; and
(d) To the extent required, the Company shall have obtained any
license necessary to use the New Japan Index as described herein. The
Company will agree in the Notes to use its reasonable efforts to obtain
any such license.
10
<PAGE>
Notwithstanding the above, unless the Nikkei 225 Index is no longer
published and/or the Nikkei 225 Futures Contracts shall have been delisted
from trading on the OSE, a Substitution Event will not be deemed to have
occurred on any of the 180 days next preceding the maturity date of the
Notes.
All disclosure contained in this Prospectus regarding the Nikkei 225
Index, Nikkei 225 Futures Contract, Nikkei 300 Index, Nikkei 300 Futures
Contract, or their publisher, Nihon Keizai Shimbun, Inc., is derived from
publicly available information. Nihon Keizai Shimbun, Inc. has no
relationship with the Company or the Notes; it does not sponsor, endorse,
authorize, sell or promote the Notes, and has no obligation or liability in
connection with the administration, marketing or trading of the Notes.
DISCONTINUANCE OF THE INDEX
If the AMEX discontinues publication of the Japan Index (or, if a New
Japan Index has been substituted for the Japan Index, publication of the
New Japan Index has been discontinued) and the AMEX or another entity
publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to such Index (any
such index being referred to hereinafter as a "Successor Index"), then,
upon the Calculation Agent's notification of such determination to the
Trustee and the Company, the Calculation Agent will substitute the
Successor Index as calculated by the AMEX or such other entity for the
Japan Index or the New Japan Index, as the case may be, and calculate the
Final Average Value as described above under "Payment at Maturity". Upon
any selection by the Calculation Agent of a Successor Index, the Company
shall cause notice thereof to be given to Holders of the Notes.
If the AMEX discontinues publication of the Japan Index (or, if a New
Japan Index has been substituted for the Japan Index, publication of the
New Japan Index has been discontinued) and a Successor Index is not
selected by the Calculation Agent or is no longer published on any of the
Calculation Dates, the value to be substituted for the Index for any such
Calculation Date used to calculate the Supplemental Redemption Amount at
maturity will be a value computed by the Calculation Agent for each
Calculation Date in accordance with the procedures last used to calculate
the Index prior to any such discontinuance. If a Successor Index is
selected or the Calculation Agent calculates a value as a substitute for
the Index as described below, such Successor Index or value shall be
substituted for the Index for all purposes, including for purposes of
determining whether a Market Disruption Event exists.
If the AMEX discontinues publication of the Japan Index (or, if a New
Japan Index has been substituted for the Japan Index, publication of the
New Japan Index has been discontinued) prior to the period during which the
Supplemental Redemption Amount is to be determined and the Calculation
Agent determines that no Successor Index is available at such time, then on
each Business Day until the earlier to occur of (i) the determination of
the Final Average Value and (ii) a determination by the Calculation Agent
that a Successor Index is available, the Calculation Agent shall determine
the value that would be used in computing the Supplemental Redemption
Amount as described in the preceding paragraph as if such day were a
Calculation Date. The Calculation Agent will cause notice of each such
value to be published not less often than once each month in The Wall
Street Journal (or another newspaper of general circulation), and arrange
for information with respect to such values to be made available by
telephone. Notwithstanding these alternative arrangements, discontinuance
of the publication of the Index may adversely affect trading in the
Securities.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a beneficial owner of a
Security upon any acceleration permitted by the Securities, with respect to
each $1,000 principal amount thereof, will be equal to: (i) the initial
issue price ($1,000), plus (ii) an additional amount of contingent interest
calculated as though the date of early repayment were the maturity date of
the Securities. The Calculation Period used to calculate the final Yearly
Value of the Notes so accelerated will begin on the eighth scheduled
Business Day next preceding the scheduled date for such early redemption.
If such final Yearly Value is the only Yearly Value which shall have been
calculated with respect to the Notes, such final Yearly Value will
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be the Final Average Value. If one or two other Yearly Values shall have
been calculated with respect to the Notes for prior years when the Notes
shall have been outstanding, the average (mean) of the final Yearly Value
and such one other Yearly Value or such two other Yearly Values, as the
case may be, will be the Final Average Value. The Minimum Supplemental
Redemption Amount with respect to any such early redemption date will be an
amount equal to the interest which would have accrued on the Securities
from and including the date of original issuance to but excluding the date
of early redemption at an annualized rate of 2.33%, calculated on a
semiannual bond equivalent basis. See "Description of Securities-Payment at
Maturity" in this Prospectus Supplement. If a bankruptcy proceeding is
commenced in respect of the Company, the claim of the beneficial owner of a
Security may be limited, under Section 502(b)(2) of Title 11 of the United
States Code, to the principal amount of the Security plus an additional
amount of contingent interest calculated as though the date of the
commencement of the proceeding were the maturity date of the Securities.
In case of default in payment at the maturity date of the Securities
(whether at their stated maturity or upon acceleration), from and after the
maturity date the Securities shall bear interest, payable upon demand of
the beneficial owners thereof, at the rate of 5.5% per annum (to the extent
that payment of such interest shall be legally enforceable) on the unpaid
amount due and payable on such date in accordance with the terms of the
Securities to the date payment of such amount has been made or duly
provided for.
DEPOSITORY
All Securities are represented by one or more fully registered global
securities (the "Global Securities"). Each such Global Security is
deposited with, or on behalf of, The Depository Trust Company ("DTC"), as
Depository, registered in the name of DTC or a nominee thereof. Unless and
until it is exchanged in whole or in part for Securities in definitive
form, no Global Security may be transferred except as a whole by the
Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository or by
such Depository or any such nominee to a successor of such Depository or a
nominee of such successor.
DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the Banking Law 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
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. DTC was created to hold securities of its participants
("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.
DTC's Participants include securities brokers and dealers, banks, trust
companies, clearing corporations, and certain other organizations.
DTC is owned by a number of Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the DTC book-entry system
is also available to others, such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly ("Indirect Participants").
Purchases of Securities must be made by or through Participants, which
will receive a credit on the records of DTC. The ownership interest of each
actual purchaser of each Security ("Beneficial Owner") is in turn to be
recorded on the Participants' or Indirect Participants' records. Beneficial
Owners will not receive written confirmation from DTC of their purchase,
but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of
their holdings, from the Participant or Indirect Participant through which
the Beneficial Owner entered into the transaction. Ownership of beneficial
interests in such Global Security will be shown on, and the transfer of
such ownership interests will be effected only through, records maintained
by DTC (with respect to interests of Participants) and on the records of
Participants (with respect to interests of persons held through
Participants). The laws of some states may require that certain purchasers
of
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securities take physical delivery of such securities in definitive form.
Such limits and such laws may impair the ability to own, transfer or pledge
beneficial interests in Global Securities.
So long as DTC, or its nominee, is the registered owner of a Global
Security, DTC or its nominee, as the case may be, will be considered the
sole owner or Holder of the Securities represented by such Global Security
for all purposes under the Senior Indenture. Except as provided below,
Beneficial Owners in a Global Security will not be entitled to have the
Securities represented by such Global Securities registered in their names,
will not receive or be entitled to receive physical delivery of the
Securities in definitive form and will not be considered the owners or
Holders thereof under the Senior Indenture. Accordingly, each Person owning
a beneficial interest in a Global Security must rely on the procedures of
DTC 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 Senior 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 Security desires to give or take any action which a Holder is
entitled to give or take under the Senior Indenture, DTC 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. Conveyance of notices and
other communications by DTC to Participants, by Participants to Indirect
Participants, and by Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of the principal of, and any Supplemental Redemption Amount with
respect to, Securities registered in the name of DTC or its nominee will be
made to DTC or its nominee, as the case may be, as the Holder of the Global
Securities representing such Securities. None of the Company, the Trustee
or any other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that DTC, upon receipt of any payment of
principal or any Supplemental Redemption Amount in respect of a Global
Security, will credit the accounts of the Participants with payment in
amounts proportionate to their respective holdings in principal amount of
beneficial interest in such Global Security as shown on the records of DTC.
The Company also expects that payments by Participants to Beneficial Owners
will be governed by standing customer instructions and customary practices,
as is now the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility
of such Participants.
If (x) any Depository is at any time unwilling or unable to continue as
Depository and a successor depository is not appointed by the Company
within 60 days, (y) the Company executes and delivers to the Trustee a
Company Order to the effect that the Global Securities shall be
exchangeable or (z) an Event of Default has occurred and is continuing with
respect to the Securities, the Global Securities will be exchangeable for
Securities in definitive form of like tenor and of an equal aggregate
principal amount, in denominations of $1,000 and integral multiples
thereof. Such definitive Securities shall be registered in such name or
names as the Depository shall instruct the Trustee. It is expected that
such instructions may be based upon directions received by the Depository
from Participants with respect to ownership of beneficial interests in such
Global Securities.
THE INDEX
THE JAPAN INDEX
The Index for purposes of calculating the Supplemental Redemption Amount
will initially be the Japan Index. Unless otherwise stated, all information
herein relating to the Japan Index has been provided by the AMEX. Such
information reflects the policies of the AMEX; such policies are subject to
change in the discretion of the AMEX.
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The Japan Index is a stock index calculated, published and disseminated
by the AMEX that measures the composite price performance of selected
Japanese stocks. The Japan Index currently is based on 210 highly
capitalized Underlying Stocks trading on the TSE representing a broad
cross-section of Japanese industries. All 210 Underlying Stocks are stocks
listed in the First Section of the TSE. Stocks listed in the First Section
are among the most actively traded stocks on the Tokyo Stock Exchange.
Options contracts on the Japan Index are traded on the AMEX.
The Japan Index is a modified, price-weighted index (i.e., an Underlying
Stock's weight in the index is based on its price per share rather than the
total market capitalization of the issuer) which is calculated by (i)
multiplying the per share price of each Underlying Stock by the
corresponding weighing factor for such Underlying Stock (a "Weight
Factor"), (ii) calculating the sum of all these products and (iii) dividing
such sums by a divisor (the "Divisor"). The Divisor, initially set in
September 1990 at 9,799,460, was 9,608,946 as of January 20, 1994, and is
subject to periodic adjustments as set forth below. Each Weight Factor is
computed by dividing (Yen)50 by the par value of the relevant Underlying
Stock and multiplying the result by 100, so that the share price of each
Underlying Stock when multiplied by its Weight Factor corresponds to a
share price based on a uniform par value of (Yen)50. Each Weight Factor
represents the number of shares of the related Underlying Stock which are
included in one trading unit of the Japan Index. The stock prices used in
the calculation of the Japan Index are those reported by a primary market
for the Underlying Stock (currently the TSE). The level of the Japan Index
is calculated once per day using last sale prices only (i.e., not "special
bid quotes" or "special ask quotes" which are used in connection with other
stock indices) for transactions in Underlying Stock on the TSE. The level
of the Japan Index is disseminated via the Consolidated Tape Authority
Network-B (commonly referred to as the "AMEX Tape"). The AMEX Tape symbol
for the Japan Index is "JPN".
In order to maintain continuity in the level of the Japan Index in the
event of certain changes due to non-market factors affecting the Underlying
Stocks, such as the addition or deletion of stocks, substitution of stocks,
stock dividends, stock splits or distributions of assets to stockholders,
the Divisor used in calculating the Japan Index is adjusted in a manner
designed to prevent any instantaneous change or discontinuity in the level
of the Japan Index. Thereafter, the Divisor remains at the new value until
a further adjustment is necessary as the result of another change. As a
result of each such change affecting any Underlying Stock, the Divisor is
adjusted in such a way that the sum of all share prices immediately after
such change multiplied by the applicable Weight Factor and divided by the
new Divisor (i.e., the level of the Japan Index immediately after such
change) will equal the level of the Japan Index immediately prior to the
change.
Underlying Stocks may be deleted or added by the AMEX. However, to
maintain continuity in the Japan Index, the policy of the AMEX is generally
not to alter the composition of the Underlying Stocks except when an
Underlying Stock is deleted due to (i) bankruptcy of the issuer, (ii)
merger of the issuer with, or acquisition of the issuer by, another
company, (ii) delisting of such stock, or (iv) failure of such stock to
meet, upon periodic review by the AMEX, market value and trading volume
criteria established by the AMEX (as such may change from time to time).
Upon deletion of a stock from the Underlying Stocks, the AMEX may select a
suitable replacement for such deleted Underlying Stock. The policy of the
AMEX is to announce any such change in advance via distribution of an
information circular.
The AMEX is under no obligation to continue the calculation and
dissemination of the Japan Index. The Securities are not sponsored,
endorsed, sold or promoted by the AMEX. No inference should be drawn from
the information contained in this Prospectus that the AMEX makes any
representation or warranty, implied or express, to the Company, beneficial
owners of the Securities or any member of the public regarding the
advisability of investing in securities generally or in the Securities in
particular or the ability of the Japan Index to track general stock market
performance. The AMEX has no obligation to take the needs of the Company or
beneficial owners of the Securities into consideration in determining,
composing or calculating the Japan Index. The AMEX is not responsible for,
and has not participated in the determination or calculation of the
equation by which the Supplemental Redemption Amount with respect to the
Securities will be determined. The AMEX has no obligation or liability in
connection with the administration, marketing or trading of the Securities.
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The use of and reference to the Japan Index in connection with the
Securities has been consented to by the AMEX, the publisher of the Japan
Index. "Japan Index" is a service mark of the AMEX.
None of the Company, the Calculation Agent and the Underwriter accepts
any responsibility for the calculation, maintenance or publication of the
Japan Index or any Successor Index. The AMEX disclaims all responsibility
for any errors or omissions in the calculation and dissemination of the
Japan Index or the manner in which such index is applied in determining the
Supplemental Redemption Amount with respect to the Securities.
A potential investor should review the historical performance of the
Index. The historical performance of the Index should not be taken as an
indication of future performance, and no assurance can be given that the
Index will increase sufficiently to cause the beneficial owners of the
Securities to receive an amount in excess of the principal amount and the
Minimum Supplemental Redemption Amount at the maturity of the Securities.
THE TOKYO STOCK EXCHANGE
The Tokyo Stock Exchange is one of the world's largest securities
exchanges in terms of market capitalization. TSE is a two-way, continuous
pure auction market. Trading hours are currently from 9:00 A.M. to 11:00
A.M. and from 1:00 P.M. to 3:00 P.M., Tokyo time, Monday through Friday.
Due to the time zone difference, on any normal trading day the TSE will
close prior to the opening of business in New York City on the same
calendar day. Therefore, the closing level of the Japan Index on such
trading day will generally be available in the United States by the opening
of business on the same calendar day.
The TSE has adopted certain measures intended to prevent any extreme
short-term price fluctuation resulting from order imbalances. These include
daily price floors and ceilings intended to prevent extreme fluctuations in
individual stock prices. Any stock listed on the Tokyo Stock Exchange
cannot be traded at a price outside of these limits which are stated in
absolute Japanese yen, and not percentage, limits from the closing price of
the stock on the previous day. In addition, when there is a major order
imbalance in a listed stock, the TSE posts a "special bid quote" or a
"special asked quote" for that stock at a specified higher or lower price
level than the stock's last sale price in order to solicit counter orders
and balance supply and demand for the stock. Investors should also be aware
that the TSE may suspend the trading of individual stocks in certain
limited and extraordinary circumstances including, for example, unusual
trading activity in that stock. As a result, variations in the Japan Index
may be limited by price limitations on, or by suspension of trading in,
individual stocks which comprise the Japan Index which may, in turn,
adversely affect the value of the Securities or result in a Market
Disruption Event. See "Description of Securities-Adjustments to the Index;
Market Disruption Event".
THE NEW JAPAN INDEX
Under certain circumstances, a New Japan Index may be substituted for the
Japan Index for purposes of calculating the Supplemental Redemption Amount.
The New Japan Index would be an index published by the AMEX or another
United States securities exchange with a high correlation to the Nikkei 300
Index. See "Substitution of the Index".
The Nikkei 300 Index is an index calculated, published and disseminated
by Nihon Keizai Shimbun, Inc., that measures the composite price
performance of stocks of 300 Japanese companies. All 300 stocks are listed
in the First Section of the TSE. Stocks listed in the First Section are
among the most actively traded stocks on the TSE. Publication of the Nikkei
300 Index began on October 8, 1993.
The Nikkei 300 Index is a market capitalization-weighted index which is
calculated by (i) multiplying the per share price of each stock included in
the Nikkei 300 Index by the number of outstanding shares (excluding shares
held by the Japanese Government), (ii) calculating the sum of all these
products (such sum being hereinafter referred
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to as the "Aggregate Market Price"), (iii) dividing the Aggregate Market
Price by the Base Aggregate Market Price (i.e. the Aggregate Market Price
as of October 1, 1982) and (iv) multiplying the result by 100. Larger
companies' shares have a larger effect on moving the entire index than
smaller companies' shares.
Although the Nikkei 300 Index was first published in October 1993, Nihon
Keizai Shimbun, Inc. has calculated values for the Nikkei 300 Index for the
period from October 1, 1982 through October 8, 1993. The stocks included in
the Nikkei 300 Index (such stocks being hereinafter referred to as the
"Underlying Stocks") were selected from a reference group of stocks which
were selected by excluding stocks listed in the First Section of the TSE
that have relatively low market liquidity or extremely poor financial
results. The Underlying Stocks were selected from this reference group by
(i) selecting from the remaining stocks in this reference group the stocks
with the largest aggregate market value in each of 36 industrial sectors
and (ii) selecting additional stocks (with priority within each industrial
sector given to the stock with the largest aggregate market value) so that
the selection ratios (i.e. the ratio of the aggregate market value of the
included stocks to that of the stocks in the reference group) with respect
to all 36 industry sectors will be as nearly equal as possible and the
total number of companies with stocks included in the Nikkei 300 Index will
be 300.
In order to maintain continuity in the level of the Nikkei 300 Index, the
Nikkei 300 Index will be reviewed annually by Nihon Keizai Shimbun, Inc.
and the Underlying Stocks may be replaced, if necessary, in accordance with
the "deletion/addition rule". The "deletion/addition" rule provides
generally for the deletion of a stock from the Nikkei 300 Index if such
stock is no longer included in the reference group or if the aggregate
market value of such stock is low relative to other stocks in the relevant
industry sector. Stocks deleted pursuant to the "deletion/addition" rule
will be replaced by stocks included in the reference group which have
relatively high aggregate market values. In addition, stocks may be added
or deleted from time to time for extraordinary reasons.
All disclosure contained in this Prospectus regarding the Nikkei 225
Index, Nikkei 225 Futures Contract, Nikkei 300 Index, Nikkei 300 Futures
Contract, or their publisher, Nihon Keizai Shimbun, Inc., is derived from
publicly available information. Nihon Keizai Shimbun, Inc. has no
relationship with the Company or the Notes; it does not sponsor, endorse,
authorize, sell or promote the Notes, and has no obligation or liability in
connection with the administration, marketing or trading of the Notes.
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities may
from time to time be issued thereunder, without limitation as to aggregate
principal amount, in one or more series and upon such terms as the Company
may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
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The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Senior Indenture) on the Voting Stock owned
directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all
or substantially all of its assets to any corporation, provided that (i)
the corporation (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received such assets shall
be a corporation organized and existing under the laws of the United States
of America or a state thereof and shall assume payment of the principal of
(and premium, if any) and interest on the Senior Debt Securities and the
performance and observance of all of the covenants and conditions of the
Senior Indenture to be performed or observed by the Company, and (ii) the
Company or such successor corporation, as the case may be, shall not
immediately thereafter be in default under the Senior Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest or Additional Amounts payable on any Senior Debt Security; (d)
impair the right to institute suit for the enforcement of any payment on or
with respect to any Senior Debt Security; (e) reduce the percentage in
principal amount of the Outstanding Senior Debt Securities of any series,
the consent of whose
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Holders is required to modify or amend the Indenture; or (f) modify the
foregoing requirements or reduce the percentage of Outstanding Senior Debt
Securities necessary to waive any past default to less than a majority. No
modification or amendment of the Subordinated Indenture or any Subsequent
Indenture for Subordinated Debt Securities may adversely affect the rights
of any holder of Senior Indebtedness without the consent of such Holder.
Except with respect to certain fundamental provisions, the Holders of at
least a majority in principal amount of Outstanding Senior Debt Securities
of any series may, with respect to such series, waive past defaults under
the Indenture and waive compliance by the Company with certain provisions
thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default with
respect to Senior Debt Securities of any series: (a) default in the payment
of any interest or Additional Amounts payable on any Senior Debt Security
of that series when due, continued for 30 days; (b) default in the payment
of any principal or premium, if any, on any Senior Debt Security of that
series when due; (c) default in the deposit of any sinking fund payment,
when due, in respect of any Senior Debt Security of that series; (d)
default in the performance of any other covenant of the Company contained
in the Indenture for the benefit of such series or in the Senior Debt
Securities of such series, continued for 60 days after written notice as
provided in the Senior Indenture; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default provided
with respect to Senior Debt Securities of that series. The Trustee or the
Holders of 25% in principal amount of the Outstanding Senior Debt
Securities of that series may declare the principal amount (or such lesser
amount as may be provided for in the Senior Debt Securities of that series)
of all Outstanding Senior Debt Securities of that series and the interest
due thereon and Additional Amounts payable in respect thereof, if any to be
due and payable immediately if an Event of Default with respect to Senior
Debt Securities of such series shall occur and be continuing at the time of
such declaration. At any time after a declaration of acceleration has been
made with respect to Senior Debt Securities of any series but before a
judgment or decree for payment of money due has been obtained by the
Trustee, the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those
due as a result of acceleration) have been made and all Events of Default
have been remedied or waived. Any Event of Default with respect to Senior
Debt Securities of any series may be waived by the Holders of a majority in
principal amount of all Outstanding Senior Debt Securities of that series,
except in a case of failure to pay principal or premium, if any, or
interest or Additional Amounts payable on any Senior Debt Security of that
series for which payment had not been subsequently made or in respect of a
covenant or provision which cannot be modified or amended without the
consent of the Holder of each Outstanding Senior Debt Security of such
series affected.
The Holders of a majority in principal amount of the Outstanding Senior
Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a statement as
to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
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 (or, in the
case of certain regulations, in proposed form), all of which are subject to
change (including changes in effective dates) or possible differing
interpretations. The
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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. Persons
considering the purchase of the Notes should consult their own tax advisors
concerning the application of the United States Federal income tax laws to
their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or
resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of
any political subdivision thereof, (iii) an estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source or (iv) any other person whose income or gain in respect of a Note
is effectively connected with the conduct of a United States trade or
business. As used herein, the term "non-U.S. Holder" means a beneficial
owner of a Note that is not a U.S. Holder.
GENERAL
There are no statutory provisions, regulations (except the Proposed
Regulations as described below), published rulings or judicial decisions
involving the characterization, for United States Federal income tax
purposes, of securities with terms substantially the same as the Notes.
However, although the matter is not free from doubt, under current law,
each Note should be treated as a debt instrument of the Company for United
States Federal income tax purposes. The following discussion of the
principal United States Federal income tax consequences of the purchase,
ownership and disposition of the Notes is based upon the assumption that
each Note will be treated as a debt instrument of the Company for the
United States Federal income tax purposes.
U.S. HOLDERS
Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument generally will be taxable to a
U.S. Holder as ordinary interest income at the time such payments are
accrued or are received (in accordance with the U.S. Holder's regular
method of tax accounting). Despite the foregoing, nonperiodic noncontingent
payments of interest on a debt instrument generally will be treated as
original issue discount and will be includible in income by a U.S. Holder
as ordinary interest as it accrues over the entire term of the debt
instrument under a constant yield method in advance of receipt of the cash
payments attributable to such income, regardless of the U.S. Holder's
regular method of tax accounting. Under these principles, the Minimum
Supplemental Redemption Amount (i.e., a nonperiodic noncontingent payment
----
of interest) generally will be treated as original issue discount for
United States Federal income tax purposes and will be includible in income
by a U.S. Holder as ordinary interest as it accrues over the entire term of
the Note under a constant yield method in advance of receipt of the
Supplemental Redemption Amount, regardless of the U.S. Holder's regular
method of tax accounting. Under these same principles, the excess of the
Supplemental Redemption Amount over the Minimum Supplemental Redemption
Amount (the "Additional Interest Amount"), if any, would be treated as
contingent interest and generally would be includible in income by a U.S.
Holder as ordinary interest on the date that the Supplemental Redemption
Amount is accrued (i.e., determined) or when such amount is received (in
accordance with the U.S. Holder's regular method of tax accounting). It is
possible, however, that as of the last Calculation Date in one or more
certain Calculation Periods (other than the final Calculation Period), the
sum of the Yearly Value calculated during the Calculation Period to which
such last Calculation Date relates and the Yearly Values for all prior
Calculation Periods, if any, would equal an amount such that the
Supplemental Redemption Amount is certain to exceed the Minimum
Supplemental Redemption Amount even if the Yearly Values for all subsequent
Calculation Periods were to be zero (such Supplemental Redemption Amount is
hereinafter referred to as the "Fixed Supplemental Redemption Amount" and
each last Calculation Date relating to a certain Fixed Supplemental
Redemption Amount is hereinafter referred to as a "Fixing Calculation
Date"). Under such circumstances, an accrual method U.S. Holder would be
required to include in income on the Fixing Calculation Date as ordinary
interest an amount equal to the portion of the excess of the Fixed
Supplemental Redemption
19
<PAGE>
Amount over the Minimum Supplemental Redemption Amount or, in the event
there has been a prior Fixing Calculation Date, the portion of the excess
of the Fixed Supplemental Redemption Amount over the Fixed Supplemental
Redemption Amount relating to such prior Fixing Calculation Date (in each
case, such excess is hereinafter referred to as the "Fixed Additional
Interest Amount") that has accrued as of the Fixing Calculation Date. The
remaining portion of the Fixed Additional Interest Amount would be
includible in income by an accrual method U.S. Holder as ordinary interest
as it accrues over a period commencing on the Fixing Calculation Date and
concluding at the Note's maturity. A cash method U.S. Holder, however,
would not be required to include any portion of the Fixed Additional
Interest Amount in income prior to receipt of the Supplemental Redemption
Amount.
Upon the sale, exchange or retirement of a Note, a U.S. Holder generally
would recognize taxable gain or loss in an amount equal to the difference,
if any, between the amount realized on the sale, exchange or retirement
(i.e., the sum of the Note's stated principal amount and the Minimum
-----
Supplemental Redemption Amount in the case of retirement) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis
in a Note generally will equal such U.S. Holder's initial investment in the
Note increased by any original issue discount included in income by such
U.S. Holder with respect to the Note. Such gain or loss generally would be
long-term capital gain or loss if the Note were held by the U.S. Holder for
more than one year (subject to the market discount rules, as discussed
below). It is possible, however, that the Internal Revenue Service ("IRS")
could assert that any amounts realized upon the sale or exchange of a Note
prior to maturity in excess of the Note's adjusted issue price as of the
date of disposition (i.e., the Note's stated principal amount increased by
----
any previously accrued original issue discount with respect to the Note)
constitutes ordinary interest income (subject to the bond premium rules, as
discussed below). Nonetheless, although the matter is not free from doubt,
under current law, any gain realized upon the sale or exchange of a Note
prior to maturity (other than gain attributable to any Fixed Additional
Interest Amount that has accrued as of the date of disposition, as
described above) should be treated entirely as capital gain (subject to the
market discount rules, as discussed below).
Prospective investors in the Notes should also be aware that on January
27, 1994, certain proposed Treasury regulations that were issued in 1991
(the "1991 Proposed Regulations") under the original issue discount
provisions of the Internal Revenue Code of 1986, as amended (the "Code")
concerning the proper United States Federal income tax treatment of
contingent payment debt instruments such as the Notes were still in
existence. If ultimately adopted in their then current form, the 1991
Proposed Regulations, which contained a proposed retroactive effective date
of February 20, 1991, would have applied to the Notes and would have
bifurcated each Note into a debt instrument and a cash settlement option on
the Index for United States Federal income tax purposes. However, on
December 16, 1994, the Treasury Department issued new proposed regulations
(the "1994 Proposed Regulations" and, together with the 1991 Proposed
Regulations, the "Proposed Regulations") concerning the proper United
States Federal income tax treatment of contingent payment debt instruments
such as the Notes. The 1994 Proposed Regulations superseded the 1991
Proposed Regulations. Therefore, the 1991 Proposed Regulations were
effectively withdrawn on December 16, 1994 as a result of the issuance of
the 1994 Proposed Regulations. The 1994 Proposed Regulations, however, are
proposed to apply only to debt instruments issued 60 days or more after the
date on which the 1994 Proposed Regulations are published as final Treasury
regulations. Accordingly, if ultimately adopted in their current form, the
1994 Proposed Regulations would not apply to the Notes. Furthermore,
proposed Treasury regulations are not binding upon either the IRS or
taxpayers prior to becoming effective as temporary or final regulations. In
general, if ultimately adopted in their current form, the Proposed
Regulations would cause the timing and character of income, gain or loss
reported on a contingent payment debt instrument to substantially differ
from the timing and character of income, gain or loss reported on a
contingent payment debt instrument under general principles of current
United States Federal income tax law (as described above). Prospective
investors in the Notes are urged to consult their own tax advisers
concerning the effect, if any, of the Proposed Regulations on their
investment in the Notes.
Based upon the current state of the law, the Company, where required,
currently intends to file information returns with the IRS treating each
Note as a debt instrument of the Company for United States Federal income
tax purposes (as discussed above) and reporting noncontingent interest and
contingent interest, if any, on and gross
20
<PAGE>
proceeds received upon the sale, exchange or retirement of each Note in
accordance with general principles of current United States Federal income
tax law (as described above), in the absence of any change or clarification
in the law, by regulation or otherwise.
MARKET DISCOUNT AND PREMIUM
If a U.S. Holder purchases a Note for an amount that is less than its
adjusted issue price as of the purchase date (i.e., the Note's stated
----
principal amount increased by any previously accrued original issue
discount with respect to the Note), the U.S. Holder will be treated as
having purchased the Note at a "market discount," unless such market
discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any gain realized on the sale, exchange, retirement or other disposition of
a Note as ordinary income to the extent of the lesser of (i) the amount of
such realized gain or (ii) the market discount which has not previously
been included in income and is treated as having accrued on such Note at
the time of such payment or disposition. Market discount will be considered
to accrue ratably during the period from the date of acquisition to the
maturity date of the Note, unless the U.S. Holder elects to accrue market
discount on the basis of semiannual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion
of the interest paid or accrued on any indebtedness incurred or maintained
to purchase or carry a Note with market discount until the maturity of the
Note or its earlier disposition in a taxable transaction and certain
nontaxable transactions, because a current deduction is only allowed to the
extent that the interest expense exceeds an allocable portion of the market
discount. A U.S. Holder may elect to include market discount in income
currently as it accrues (on either a ratable or semiannual compounding
basis), in which case the rules described above regarding the treatment as
ordinary income of gain upon the disposition or retirement of the Note and
regarding the deferral of interest deductions will not apply. Generally,
such currently included market discount is treated as ordinary interest for
United States Federal income tax purposes and a U.S. Holder would increase
its tax basis in a Note by the amount of any such currently included market
discount. Such an election will apply to all debt instruments acquired by
the U.S. Holder on or after the first day of the first taxable year to
which such election applies and may be revoked only with the consent of the
IRS.
A U.S. Holder that purchases a Note for an amount that is greater than
its adjusted issue price as of the purchase date and equal to or less than
the Note's stated redemption price at maturity (i.e., the sum of the Note's
----
stated principal amount and the Minimum Supplemental Redemption Amount)
will be considered to have purchased the Note at an "acquisition premium."
Under the acquisition premium rules, the amount of original issue discount
which such U.S. Holder must include in its gross income with respect to
such Note for any taxable year (or portion thereof in which the U.S. Holder
holds the Note) will be reduced (but not below zero) by the portion of the
acquisition premium properly allocable to the period.
If a U.S. Holder purchases a Note for an amount that is greater than its
stated redemption price at maturity such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to
such excess. A U.S. Holder may elect to offset ordinary interest otherwise
required to be included in respect of the Note at maturity by the amount of
such excess and would reduce its tax basis in the Note by the amount of any
such interest offset taken. Such election, if made, would apply to all
debt instruments held by the U.S. Holder at the beginning of the taxable
year to which such election applies and to all debt instruments acquired by
such U.S. Holder thereafter. Such election would also be irrevocable once
made, unless the U.S. Holder making such an election obtains the express
consent of the IRS to revoke such election.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income
taxes on payments of principal or interest (including original issue
discount) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or
21
<PAGE>
greater shareholder of the Company, a controlled foreign corporation
described in section 957(a) of the Code with respect to the Company or a
bank receiving interest described in section 881(c)(3)(A) of the Code.
However, interest income allocable to non-U.S. Holders will generally be
subject to annual tax reporting on IRS Form 1042S. For a non-U.S. Holder 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 United States 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 own tax advisor with respect to the
applicability, if any, of such other exceptions in light of their
particular circumstances.
The Notes will not be includible in the taxable 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 sales 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 or a substantially similar form under penalties
of perjury.
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.
22
<PAGE>
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
23
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
ISSUE DATE: AUGUST 22, 1995
PROSPECTUS
- ----------
MERRILL LYNCH & CO., INC.
AMEX OIL INDEX/SM/
STOCK MARKET ANNUAL RESET TERM/SM/ NOTES
DUE DECEMBER 29, 2000 "SMART NOTES/SM/"
-----------------------------
On March 31, 1994, Merrill Lynch & Co., Inc. (the "Company") issued
$25,000,000 aggregate principal amount of AMEX Oil Index Stock Market Annual
Reset Term Notes due December 29, 2000 (the "Notes" or "SMART Notes"). The Notes
were issued in denominations of $1,000 and integral multiples thereof and will
mature and be repayable at 100% of the principal amount thereof on December 29,
2000. The Notes are not subject to redemption prior to maturity.
The Company will make interest payments on the Notes for each calendar
year at a rate per annum equal to 85% (the "Participation Rate") of the average
percentage increase, if any, in the AMEX Oil Index (as defined herein) as
determined in each calendar year from the Starting Annual Value to the Ending
Average Value as further described herein (the "Average Percent Change"). Annual
payments will in no event be less than the Minimum Annual Payment of $20 per
$1,000 principal amount of Notes on a per annum basis (2% per annum).
The "Starting Annual Value" applicable to the determination of the amount
payable in a calendar year will equal the closing value of the AMEX Oil Index on
the last AMEX Business Day in the immediately preceding calendar year. The
"Ending Average Value" applicable to the determination of the amount payable in
a calendar year will equal the arithmetic average (mean) of the Quarterly Values
of the AMEX Oil Index for each calendar quarter during such year. Interest
payments will be payable on June 30 and December 31 of each year and at maturity
as described below.
For information as to the calculation of the amount payable in any
calendar year and the calculation of the AMEX Oil Index, see "Description of
Notes" and "The AMEX Oil Index" in this Prospectus. FOR OTHER INFORMATION THAT
SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS, SEE "SPECIAL CONSIDERATIONS" IN
THIS PROSPECTUS.
Ownership of the Notes will be maintained only in book-entry form by or
through the Securities Depository. Beneficial owners of the Notes will not have
the right to receive physical certificates evidencing their ownership except
under the limited circumstances described herein.
The Notes have been listed on the American Stock Exchange under the symbol
"MOI.F".
-----------------------------
THESE NOTES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus has been prepared in connection with the Notes and is to
be used by Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("MLPF&S"), a wholly owned subsidiary of the Company, in connection
with offers and sales related to market-making transactions in the Notes. MLPF&S
may act as principal or agent in such transactions. The Notes may be offered on
a national securities exchange in the event the particular issue of Notes has
been listed on such exchange, or off such exchange in negotiated transactions,
or otherwise. Sales will be made at prices related to prevailing prices at the
time of sale. The distribution of the Notes will conform to the requirements set
forth in the applicable sections of Schedule E to the By-Laws of the National
Association of Securities Dealers, Inc.
-----------------------------
MERRILL LYNCH & CO.
-----------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1995.
/SM/"SMART Notes" and "Stock Market Annual Reset Term" are service marks of
Merrill Lynch & Co., Inc.
/SM/"Oil Index" is a registered service mark of the American Stock Exchange,
Inc.
<PAGE>
The Commissioner of Insurance of The State of North Carolina has not
approved or disapproved the offering of the Notes made hereby nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus
Supplement or Prospectus.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy and
information statements and other information filed by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: Midwest Regional
Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511
and Northeast Regional Office, Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
at prescribed rates. Reports, proxy and information statements and other
information concerning the Company may also be inspected at the offices of
the New York Stock Exchange, the American Stock Exchange, the Chicago Stock
Exchange and the Pacific Stock Exchange.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended December 30,
1994, Quarterly Reports on Form 10-Q for the periods ended March 31, 1995
and June 30, 1995, and Current Reports on Form 8-K dated January 12, 1995,
January 23, 1995, February 8, 1995, February 9, 1995, March 3, 1995, March
9, 1995, April 18, 1995, May 2, 1995, May 23, 1995, July 18, 1995, July 21,
1995, August 1, 1995, and August 2, 1995 filed pursuant to Section 13 of
the Exchange Act, are hereby incorporated by reference into this
Prospectus.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the maturity of the Notes shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of
filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A
COPY (WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY
REFERENCE) OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T.
RUSSO, SECRETARY, MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR,
NEW YORK, NEW YORK 10080-6512; TELEPHONE NUMBER (212) 602-8435.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF AN
OFFER TO BUY FROM, ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
2
<PAGE>
MERRILL LYNCH & CO., INC.
Merrill Lynch & Co., Inc. is a holding company that, through its
subsidiaries and affiliates, provides investment, financing, insurance, and
related services on a global basis. Its principal subsidiary, MLPF&S, one
of the largest securities firms in the world, is a leading broker in
securities, options contracts, and commodity and financial futures
contracts; a leading dealer in options and in corporate and municipal
securities; a leading investment banking firm that provides advice to, and
raises capital for, its clients; and an underwriter of selected insurance
products. Other subsidiaries provide financial services on a global basis
similar to those of MLPF&S and are engaged in such other activities as
international banking, lending, and providing other investment and
financing services. Merrill Lynch International Incorporated, through
subsidiaries and affiliates, provides investment, financing, and related
services outside the United States and Canada. Merrill Lynch Government
Securities Inc. is a primary dealer in obligations issued or guaranteed by
the U.S. Government and by Federal agencies or instrumentalities. Merrill
Lynch Capital Services, Inc., Merrill Lynch Derivative Products, Inc., and
Merrill Lynch Capital Markets PLC are the Company's primary derivative
product dealers and enter into interest rate and currency swaps and other
derivative transactions as intermediaries and as principals. Merrill Lynch
Asset Management, L.P., with its related affiliates, is one of the largest
mutual fund managers in the world and provides investment advisory
services. The Company's insurance underwriting operations consist of the
underwriting of life insurance and annuity products. Banking, trust, and
mortgage lending operations conducted through subsidiaries of the Company
include issuing certificates of deposit, offering money market deposit
accounts, making secured loans, and providing foreign exchange facilities
and other related services.
The principal executive office of the Company is located at World
Financial Center, North Tower, 250 Vesey Street, New York, New York 10281;
its telephone number is (212) 449-1000.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED LAST FRIDAY IN DECEMBER ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges 1.1 1.2 1.3 1.4 1.2 1.1
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income
taxes and fixed charges. "Fixed charges" consists of interest costs,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
SPECIAL CONSIDERATIONS
INTEREST PAYMENTS
If the Ending Average Value applicable to a December Payment Date does
not exceed the Starting Annual Value applicable to such December Payment
Date by more than approximately 2.35%, beneficial owners of the Notes will
receive only the Minimum Annual Payment on such December Payment Date, even
if the value of the AMEX Oil Index at some point between the determination
of the applicable Starting Annual Value and the determination of the
applicable Ending Average Value exceeded such Starting Annual Value by more
than approximately 2.35%. The annual amount payable on the Notes based on
the AMEX Oil Index is limited to the Participation Rate multiplied by the
percentage increase, if any, between the Starting Annual Value and the
Ending Average Value for such year.
3
<PAGE>
Beneficial owners of the Notes will receive total annual payments
equal to not less than the Minimum Annual Payment, and will be repaid 100%
of the principal amount of the Notes at maturity. Beneficial owners of
Notes may receive interest payments with respect to the Notes equal to only
the Minimum Annual Payment for each year, and such interest payments are
below what the Company would pay as interest as of the date hereof if the
Company issued non-callable senior debt securities with a similar maturity
as that of the Notes. The payment of additional amounts on the Notes is
subject to the conditions described under "Description of Notes--Interest
Payments". The return of principal of the Notes at maturity and the payment
of the Minimum Annual Payment are not expected to reflect the full
opportunity costs implied by inflation or other factors relating to the
time value of money.
The amount payable on the Notes based on the AMEX Oil Index will not
produce the same return as if the stocks underlying the AMEX Oil Index were
purchased and held for a similar period because of the following: (i) the
AMEX Oil Index does not reflect the payment of dividends on the stocks
underlying it, (ii) the annual amount payable is limited to the
Participation Rate multiplied by the percentage increase in the AMEX Oil
Index during any relevant period, subject to the Minimum Annual Payment,
(iii) the Ending Average Value may not reflect the full percentage increase
in the AMEX Oil Index during any relevant period because it is an average
of the AMEX Oil Index at various points in time and (iv) the amounts
payable on the Notes do not reflect changes in the AMEX Oil Index for the
period between the determination of an Ending Average Value and the
determination of the next succeeding Starting Annual Value.
The Indenture provides that the Indenture and the Notes will be
governed by and construed in accordance with the laws of the state of New
York. Under present New York law, the maximum rate of interest is 25% per
annum on a simple interest basis. This limit may not apply to Notes in
which $2,500,000 or more has been invested. While the company believes that
New York law would be given effect by a state or federal court sitting
outside of New York, state laws frequently regulate the amount of interest
that may be charged to and paid by a borrower (including, in some cases,
corporate borrowers). It is suggested that prospective investors consult
their personal advisors with respect to the applicability of such laws. The
Company has covenanted for the benefit of the beneficial owners of the
Notes, to the extent permitted by law, not to claim voluntarily the
benefits of any laws concerning usurious rates of interest against a
beneficial owner of the Notes.
TRADING
The Notes have been listed on the American Stock Exchange under the
symbol "MOI.F". There can be no assurance as to how the Notes will trade in
the secondary market or whether such market will be liquid. It is expected
that the secondary market for the Notes (including prices in such market)
will likely be affected by the creditworthiness of the Company and by a
number of other factors. It is possible to view the Notes as the economic
equivalent of a debt obligation plus a series of cash settlement options;
however, the Notes may trade in the secondary market at a discount from the
aggregate value of such economic components, if such economic components
were valued and capable of being traded separately.
The trading values of the Notes may be affected by a number of
interrelated factors, including those listed below. The following is the
expected theoretical effect on the trading value of the Notes of each of
the factors listed below. The following discussion of each separate factor
generally assumes that all other factors are held constant, although the
actual interrelationship between certain of such factors is complex.
Relative Level of the AMEX Oil Index. The trading value of the Notes
is expected to depend significantly on the extent of the excess of the
expected Ending Average Value for a calendar year over the Starting Annual
Value applicable to such calendar year. If, however, Notes are sold at a
time when the AMEX Oil Index (or the estimated Ending Average Value if such
value were calculated at such time) exceeds the Starting Annual Value, the
sale price may nevertheless be at a discount from the amount expected to be
payable to the beneficial owner if such excess were to prevail until the
next December Payment Date. Furthermore, the price at which a beneficial
owner will be able to sell Notes prior to a December Payment Date may be at
a discount, which could be substantial, from the principal amount thereof,
if, at such time, the AMEX Oil Index is below, equal to or not sufficiently
above the
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Annual Starting Value applicable to such December Payment Date. The level
of the AMEX Oil Index will depend on the prices of the stocks underlying
such Index which, in turn, will be affected by factors affecting the oil
industry, see "The AMEX Oil Index--Oil Industry Sector".
Volatility of the AMEX Oil Index. If the volatility of the AMEX Oil
Index increases, the trading value of the Notes is expected to increase. If
the volatility of the AMEX Oil Index decreases, the trading value of the
Notes is expected to decrease.
U.S. Interest Rates. In general, if U.S. interest rates increase,
the value of the Notes is expected to decrease. If U.S. interest rates
decrease, the value of the Notes is generally expected to increase.
Interest rates may also affect the U.S. economy, and, in turn, the level of
the AMEX Oil Index. Rising interest rates may lower the level of the AMEX
Oil Index and, thus, the value of the Notes. Falling interest rates may
increase the level of the AMEX Oil Index and, thus, may increase the value
of the Notes.
Time Remaining to December Payment Dates. The Notes may trade at a
value above that which may be inferred from the level of U.S. interest
rates and the AMEX Oil Index. This difference will reflect a "time premium"
due to expectations concerning the level of the AMEX Oil Index during the
period prior to each December Payment Date. As the time remaining to each
December Payment Date decreases, however, this time premium may decrease,
thus decreasing the trading value of the Notes.
Time Remaining to Maturity. As the number of remaining December
Payment Dates decreases, the cumulative value of all the annual rights to
receive an amount that reflects participation in the payments in excess of
the Minimum Annual Payment will decrease, thus decreasing the value of the
Notes.
Dividend Rates. A number of complex relationships between the
relative values of the Notes and dividend rates are likely to exist. If
dividend rates on the stocks comprising the AMEX Oil Index increase, the
value of the annual right to receive an amount that reflects participation
in the average appreciation of the AMEX Oil Index above the Starting Annual
Value is expected to decrease. Consequently the value of the Notes is
expected to decrease. Conversely, if dividend rates on the stocks
comprising the AMEX Oil Index decrease, the value of the annual right to
receive such an amount is expected to increase and, therefore, the value of
the Notes is expected to increase. In general, however, because the
majority of issuers of stocks underlying the AMEX Oil Index are organized
in the United States, rising U.S. corporate dividend rates may increase the
AMEX Oil Index and, in turn, increase the value of the Notes. Conversely,
falling U.S. dividend rates may decrease the AMEX Oil Index and, in turn,
decrease the value of the Notes.
OTHER CONSIDERATIONS
It is suggested that prospective investors who consider purchasing the
Notes should reach an investment decision only after carefully considering
the suitability of the Notes in light of their particular circumstances.
Investors should also consider the tax consequences of investing in the
Notes and should consult their tax advisors.
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DESCRIPTION OF NOTES
GENERAL
The Notes were issued as a series of Senior Debt Securities under the
Senior Indenture, dated as of April 1, 1983, as amended and restated, as
described below. The Notes will mature, and the principal of the Notes
will be repayable at par, on December 29, 2000.
The Notes are not subject to redemption prior to maturity by the
Company or at the option of any beneficial owner. Upon the occurrence of an
Event of Default with respect to the Notes, however, beneficial owners of
the Notes or the Senior Debt Trustee may accelerate the maturity of the
Notes, as described under "Description of Notes--Events of Default and
Acceleration" and "Other Terms--Event of Default" in this Prospectus.
The Notes are transferable in denominations of $1,000 and integral
multiples thereof.
INTEREST PAYMENTS
For each full calendar year, the Company will pay interest in an
amount equal to the following for each $1,000 principal amount of Notes:
$1,000 x Average Percent Change x Participation Rate
provided, however, that the per annum amount payable as a result of the
foregoing on the Notes will not be less than the Minimum Annual Payment of
$20 per $1,000 principal amount of Notes on a per annum basis (2% per
annum). The Participation Rate equals 85%.
The "Average Percent Change" applicable to the determination of the
amount payable in any calendar year will equal:
Ending Average Value -- Starting Annual Value
---------------------------------------------
Starting Annual Value
The "Starting Annual Value" applicable to the determination of the amount
payable in a calendar year will equal the closing value of the AMEX Oil
Index on the last AMEX Business Day in the immediately preceding calendar
year as determined by State Street Bank and Trust Company (the "Calculation
Agent"). The "Ending Average Value" applicable to the determination of the
amount payable in a calendar year will equal the arithmetic average (mean)
of the Quarterly Values of the AMEX Oil Index for each calendar quarter
during such year as determined by the Calculation Agent. The "Quarterly
Value" for any of the first three calendar quarters in a calendar year will
be the closing value of the AMEX Oil Index on the last scheduled AMEX
Business Day in any such calendar quarter; provided, however, that if a
Market Disruption Event has occurred on such last scheduled AMEX Business
Day in such calendar quarter, the Quarterly Value for such calendar quarter
will be the closing value of the AMEX Oil Index on the next succeeding
scheduled AMEX Business Day regardless of whether a Market Disruption Event
occurs on such day. The "Quarterly Value" for the fourth calendar quarter
in a calendar year will be the closing value of the AMEX Oil Index on the
seventh scheduled AMEX Business Day preceding the end of such calendar
quarter; provided, however, that if a Market Disruption Event has occurred
on such seventh scheduled AMEX Business Day, the Quarterly Value for such
calendar quarter will be the closing value of the AMEX Oil Index on the
sixth scheduled AMEX Business Day preceding the end of such calendar
quarter regardless of whether a Market Disruption Event occurs on such day.
The Calculation Agent will determine scheduled AMEX Business Days.
If the Ending Average Value applicable to such December Payment Date
does not exceed the Annual Starting Value by more than approximately 2.35%,
beneficial owners of the Notes will receive only the Minimum Annual Payment
on such December Payment Date, even if the value of the AMEX Oil Index at
some point between
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the determination of the applicable Starting Annual Value and the
determination of the applicable Ending Average Value exceeded such Starting
Annual Value by more than approximately 2.35%.
Any day on which a Starting Annual Value or a closing value of the
AMEX Oil Index for a calendar quarter is required to be calculated is
referred to herein as a "Calculation Day". An "AMEX Business Day" is a day
on which the American Stock Exchange is open for trading. All
determinations made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, in the absence of manifest error,
shall be conclusive for all purposes and binding on the Company and
beneficial owners of the Notes. All percentages resulting from any
calculation on the Notes will be rounded to the nearest one hundred-
thousandth of a percentage point, with five one millionths of a percentage
point rounded upwards (e.g., 9.876545% (or .09876545) would be rounded to
9.87655% (or .0987655)), and all dollar amounts used in or resulting from
such calculation will be rounded to the nearest cent (with one-half cent
being rounded upwards).
ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENT
If at any time the method of calculating the AMEX Oil Index, or the
value thereof, is changed in a material respect, or if the AMEX Oil Index
is in any other way modified so that such index does not, in the opinion of
the Calculation Agent, fairly represent the value of the AMEX Oil Index had
such changes or modifications not been made, then, from and after such
time, the Calculation Agent shall, at the close of business in New York,
New York, on each Calculation Day, make such adjustments as, in the good
faith judgment of the Calculation Agent, may be necessary in order to
arrive at a calculation of a value of a stock index comparable to the AMEX
Oil Index as if such changes or modifications had not been made, and
calculate such closing value with reference to the AMEX Oil Index, as
adjusted. Accordingly, if the method of calculating the AMEX Oil Index is
modified so that the value of such index is a fraction or a multiple of
what it would have been if it had not been modified (e.g., due to a split
in the Index), then the Calculation Agent shall adjust such index in order
to arrive at a value of the AMEX Oil Index as if it had not been modified
(e.g., as if such split had not occurred).
"Market Disruption Event" means either of the following events, as
determined by the Calculation Agent:
(i) the suspension or material limitation (limitations pursuant to
New York Stock Exchange Rule 80A (or any applicable rule or regulation
enacted or promulgated by the New York Stock Exchange, the American Stock
Exchange, or the Securities and Exchange Commission of similar scope as
determined by the Calculation Agent) on trading during significant market
fluctuations shall be considered "material" for purposes of this
definition), in each case, during the last half hour of trading in any of
the component stocks, or depository receipts representing such stocks,
included in the AMEX Oil Index on any national securities exchange in the
United States, or
(ii) the suspension or material limitation, in each case during the
last half hour of trading (whether by reason of movements in price
exceeding levels permitted by the relevant exchange or otherwise), in (A)
futures contracts related to the AMEX Oil Index which are traded on any
exchange or board of trade in the United States (B) option contracts
related to the AMEX Oil Index which are traded on the American Stock
Exchange.
For the purposes of this definition, a limitation on the hours in a
trading day and/or number of days of trading will not constitute a Market
Disruption Event if it results from an announced change in the regular
business hours of the relevant exchange. As of the date of this Prospectus
Supplement, futures contracts related to the AMEX Oil Index are not traded
on any exchange or board of trade in the United States.
INTEREST PAYMENT DATES
The Company will make semiannual interest payments on the Notes on June
30 of each year ("June Payment Dates") and December 31 of each year and at
maturity ("December Payment Dates"), except as provided below, to the
persons in whose names the Notes are registered on the immediately
preceding June 29 or December 30, and, at maturity, to the person to whom
the principal is payable. For each Note, the Company will pay half of the
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Minimum Annual Payment for each calendar year on the June Payment Date, and
will pay the balance of the annual amount payable on such Note for such
year on the December Payment Date.
Notwithstanding the foregoing, if it is known at least three Business
Days prior to December 31 that December 31 will not be a Business Day, the
amount payable by the Company with respect to a December Payment Date for
the Notes will be made on the Business Day immediately preceding such
December 31 to the persons in whose names the Notes are registered on the
second Business Day immediately preceding such December 31.
UNAVAILABILITY OF THE AMEX OIL INDEX
If the AMEX discontinues publication of the AMEX Oil Index and the AMEX
or another entity publishes a successor or substitute index that the
Calculation Agent determines, in its sole discretion, to be comparable to
the AMEX Oil Index (any such index being referred to hereinafter as a
"Successor Index"), then, upon the Calculation Agent's notification of such
determination to the Trustee and the Company, the Calculation Agent will
substitute the Successor Index as calculated by the AMEX or such other
entity for the AMEX Oil Index and calculate the annual amount payable as
described above under "Interest Payments". Upon any selection by the
Calculation Agent of a Successor Index, the Company shall cause notice
thereof to be given to Holders of the Notes.
If the AMEX discontinues publication of the AMEX Oil Index and a
Successor Index is not selected by the Calculation Agent or is no longer
published on any of the Calculation Days, the value to be substituted for
the AMEX Oil Index for any such Calculation Day used to calculate the
annual amount payable will be a value computed by the Calculation Agent for
each Calculation Day in accordance with the procedures last used to
calculate the AMEX Oil Index prior to any such discontinuance. If a
Successor Index is selected or the Calculation Agent calculates a value as
a substitute for the AMEX Oil Index such Successor Index or value shall be
substituted for the AMEX Oil Index for all purposes, including for purposes
of determining whether a Market Disruption Event exists.
If the AMEX discontinues publication of the AMEX Oil Index prior to the
period during which the amount payable with respect to any year is to be
determined and the Calculation Agent determines that no Successor Index is
available at such time, then on each AMEX Business Day until the earlier to
occur of (i) the determination of the amount payable with respect to such
year or (ii) a determination by the Calculation Agent that a Successor
Index is available, the Calculation Agent shall determine the value that
would be used in computing the amount payable with respect to such year as
described in the preceding paragraph as if such day were a Calculation Day.
The Calculation Agent will cause notice of each such value to be published
not less often than once each month in the Wall Street Journal (or another
newspaper of general circulation), and arrange for information with respect
to such values to be made available by telephone. Notwithstanding these
alternative arrangements, discontinuance of the publication of the AMEX Oil
Index may adversely affect trading in the Notes.
EVENTS OF DEFAULT AND ACCELERATION
In case an Event of Default with respect to any Notes shall have occurred
and be continuing, the amount payable to a beneficial owner of a Note upon
any acceleration permitted by the Notes, will equal: (i) the principal
amount thereof, plus (ii) an additional amount, if any, of interest
calculated as though the date of early repayment were a December Payment
Date and prorated through such date of early repayment on the basis of a
year consisting of 360 days of twelve 30-day months. If Quarterly Values
have been calculated prior to the early redemption date for the calendar
year in which such early redemption date occurs, such Quarterly Values
shall be averaged with the value of the AMEX Oil Index determined with
respect to such date of early redemption. If no Quarterly Values have been
calculated prior to the early redemption date for the calendar year in
which the early redemption date occurs, the Ending Average Value for such
calendar year will be the value of the AMEX Oil Index determined with
respect to such date of early redemption. The Minimum Supplemental
Redemption Amount with respect to any such early redemption date will be an
amount equal to the interest which would have accrued on the Notes from and
including January 1 in the calendar year in which such early redemption
date occurs, to but excluding the date of early redemption at an annualized
rate of 2%, calculated on a semiannual bond equivalent basis. If a
bankruptcy
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proceeding is commenced in respect of the Company, the claim of the
beneficial owner of a Note may be limited, under Section 502(b)(2) of Title
11 of the United States Code, to the principal amount of the Note plus an
additional amount, if any, of contingent interest calculated as though the
date of the commencement of the proceeding were the maturity date of the
Notes.
In case of default in payment at the maturity date of the Notes (whether
at their stated maturity or upon acceleration), from and after the maturity
date the Notes shall bear interest, payable upon demand of the Holders
thereof, at the rate of 7% per annum (to the extent that payment of such
interest shall be legally enforceable) on the unpaid amount due and payable
on such date in accordance with the terms of the Notes to the date payment
of such amount has been made or duly provided for.
NOTE DEPOSITORY
The Notes are represented by fully registered global securities (the
"Global Securities"). Each such Global Security has been deposited with, or
on behalf of, The Depository Trust Company, as Securities Depository,
registered in the name of the Securities Depository or a nominee thereof.
Unless and until it is exchanged in whole or in part for Securities in
definitive form, no Global Security may be transferred except as a whole by
the Securities Depository to a nominee of such Securities Depository or by
a nominee of such Securities Depository to such Securities Depository or
another nominee of such Securities Depository or by such Securities
Depository or any such nominee to a successor of such Securities Depository
or a nominee of such successor.
The Securities Depository has advised the Company as follows: The
Securities Depository is a limited-purpose trust company organized under
the Banking Law 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 pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. The Securities Depository was created to hold securities of its
participants ("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 Securities Depository's Participants include
securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. The Securities Depository is
owned by a number of Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. The Underwriter (as hereinafter defined) is a
Participant. Access to the Securities Depository book-entry system is also
available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Participant,
either directly or indirectly ("Indirect Participants").
Purchases of Notes must be made by or through Participants, which will
receive a credit on the records of the Securities Depository. The ownership
interest of each actual purchaser of each Note ("Beneficial Owner") is in
turn to be recorded on the Participants' or Indirect Participants' records.
Beneficial Owners will not receive written confirmation from the Securities
Depository of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Participant or Indirect
Participant through which the Beneficial Owner entered into the
transaction. Ownership of beneficial interests in such Global Security will
be shown on, and the transfer of such ownership interests will be effected
only through, records maintained by the Securities Depository (with respect
to interests of Participants) and on the records of Participants (with
respect to interests of persons held through Participants). The laws of
some states may 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 own, transfer or pledge beneficial interests in
Global Securities.
So long as the Securities Depository, or its nominee, is the registered
owner of a Global Security, the Securities Depository or its nominee, as
the case may be, will be considered the sole owner or Holder of the Notes
represented by such Global Security for all purposes under the Senior
Indenture. Except as provided below, Beneficial Owners in a Global Security
will not be entitled to have the Notes represented by such Global
Securities registered in their names, will not receive or be entitled to
receive physical delivery of the Notes in definitive registered form and
will not be considered the owners or Holders thereof under the Senior
Indenture. Accordingly, each Person owning a beneficial interest in a
Global
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Security must rely on the procedures of the Securities Depository 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 Senior 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 Security desires to give or take any action which a Holder is
entitled to give or take under the Senior Indenture, the Securities
Depository 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. Conveyance of notices and other communications by the Securities
Depository to Participants, by Participants to Indirect Participants, and
by Participants and Indirect Participants to Beneficial Owners will be
governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Payment of the principal of, and amounts payable on any June Payment Date
or December Payment Date with respect to Notes registered in the name of
the Securities Depository or its nominee, will be made to the Securities
Depository or its nominee, as the case may be, as the Holder of the Global
Securities representing such Notes. None of the Company, the Trustee or any
other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for
supervising or reviewing any records relating to such beneficial ownership
interests. The Company expects that the Securities Depository, upon receipt
of any payment of principal or amounts payable on any June Payment Date or
December Payment Date in respect of a Global Security, will credit the
accounts of the Participants with payment in amounts proportionate to their
respective holdings in principal amount of beneficial interest in such
Global Security as shown on the records of the Securities Depository. The
Company also expects that payments by Participants to Beneficial Owners
will be governed by standing customer instructions and customary practices,
as is now the case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the responsibility
of such Participants.
If (x) the Securities Depository is at any time unwilling or unable to
continue as Securities Depository and a successor depository is not
appointed by the Company within 60 days, (y) the Company executes and
delivers to the Trustee a Company Order to the effect that the Global
Securities shall be exchangeable or (z) an Event of Default has occurred
and is continuing with respect to the Notes, the Global Securities will be
exchangeable for Notes in definitive form of like tenor and of an equal
aggregate principal amount, in denominations of $1,000 and integral
multiples thereof. Such definitive Notes shall be registered in such name
or names as the Securities Depository shall instruct the Trustee. It is
expected that such instructions may be based upon directions received by
the Securities Depository from Participants with respect to ownership of
beneficial interests in such Global Securities.
THE AMEX OIL INDEX
GENERAL
The AMEX Oil Index is a price-weighted stock index (i.e., an Underlying
Stock's weight in the index is based on its price per share rather than the
total market capitalization of the issuer) calculated, published and
disseminated by the AMEX that measures the composite price performance of
selected common stocks of widely-held corporations involved in various
segments of the oil industry. The AMEX Oil Index was originally published
by the AMEX as the Oil and Gas Index. In September, 1984 the AMEX changed
the Oil and Gas Index from a market-weighted index to a price-weighted
index and deleted all companies engaged exclusively in gas exploration and
production activities. The Oil and Gas Index was then renamed the Oil
Index. At March 24, 1994, the calculation of the value of the AMEX Oil
Index was based on the relative value of the aggregate market price of the
common stocks of sixteen companies engaged in various segments of the oil
industry.
The AMEX may from time to time, with approval of the Securities and
Exchange Commission (the "SEC"), add companies to, or delete companies
from, the AMEX Oil Index to fulfill the above-stated intention of providing
an indication of price movements of common stock of corporations engaged in
various segments of the oil industry. The level of the AMEX Oil Index is
calculated once per day using last sale prices only (i.e., not special "bid
quotes" or special "ask quotes" which are used in connection with other
stock indices). The level of the AMEX Oil Index is disseminated
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via the Consolidated Tape Authority Network-B (commonly referred to as the
"AMEX Tape"). The AMEX Tape Symbol for the AMEX Oil Index is "XOI".
COMPUTATION OF THE AMEX OIL INDEX
At March 24, 1994, the AMEX computed the AMEX Oil Index as of a
particular time as follows:
(1) the market price of one share of each component stock is determined
as of such time;
(2) the market prices of all component stocks as of such time (as
determined under clause (1) above) are aggregated;
(3) the aggregate amount (as determined under clause (2) above) is
divided by 3.47874 (the "Divisor").
While the AMEX employed the above methodology to calculate the AMEX Oil
Index at March 24, 1994, no assurance can be given that the AMEX will not
modify or change such methodology in a manner that may affect the amounts
payable on any December Payment Date to beneficial owners of the Notes.
In order to maintain continuity in the level of the AMEX Oil Index in the
event of certain changes due to non-market factors affecting the Underlying
Stocks, such as the addition or deletion of stocks, substitution of stocks,
stock dividends, stock splits or distributions of assets to stockholders,
the Divisor used in calculating the AMEX Oil Index is adjusted in a manner
designed to prevent any instantaneous change or discontinuity in the level
of the AMEX Oil Index. Thereafter, the Divisor remains at the new value
until a further adjustment is necessary as the result of another change. As
a result of each such change affecting any component stock, the Divisor is
adjusted in such a way that the level of the AMEX Oil Index immediately
after such change will equal the level of the AMEX Oil Index immediately
prior to the change.
Component stocks may be deleted or added by the AMEX with approval of the
SEC. However, to maintain continuity in the AMEX Oil Index, the policy of
the AMEX is generally not to alter the composition of the component stocks
except when a component Stock is deleted due to (i) bankruptcy of the
issuer, (ii) merger of the issuer with, or acquisition of the issuer by,
another company, (iii) delisting of such stock, or (iv) failure of such
stock to meet, upon periodic review by the AMEX, market value and trading
volume criteria established by the AMEX (as such may change from time to
time). Upon deletion of a stock from the component stocks, the AMEX may
select a suitable replacement for such deleted component stock. The policy
of the AMEX is to announce any such change in advance via distribution of
an information circular.
The use of and reference to the AMEX Oil Index in connection with the
Securities has been consented to by the AMEX, the publisher of the AMEX Oil
Index and, in connection with such consent, the AMEX has requested that the
following information appear in this Prospectus Supplement. The AMEX is
under no obligation to continue the calculation and dissemination of the
AMEX Oil Index. The Notes are not sponsored, endorsed, sold or promoted by
the AMEX. No inference should be drawn from the information contained in
this Prospectus Supplement that the AMEX makes any representation or
warranty, implied or express, to the Company, beneficial owners of the
Notes or any member of the public regarding the advisability of investing
in securities generally or in the Notes in particular or the ability of the
AMEX Oil Index to track general stock market performance. The AMEX has no
obligation to take the needs of the Company or beneficial owners of the
Notes into consideration in determining, composing or calculating the AMEX
Oil Index. The AMEX is not responsible for, and has not participated in the
determination or calculation of the equation by which the Notes with
respect to the annual payments will be determined. The AMEX has no
obligation or liability in connection with the administration, marketing or
trading of the Notes. The AMEX disclaims all responsibility for any errors
or omissions in the calculation and dissemination of the AMEX Oil Index or
the manner in which such index is applied in determining the annual
payments with respect to the Notes.
None of the Company, the Calculation Agent, the Underwriter nor the
Trustee accepts any responsibility for the calculation, maintenance or
publication of the AMEX Oil Index or any Successor Index.
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A potential investor should review the historical prices of the
securities underlying the Amex Oil Index. The historical prices of such
securities should not be taken as an indication of future performance, and
no assurance can be given that the prices of such securities will increase
sufficiently to cause the beneficial owners of the Securities to receive an
amount in excess of the Minimum Annual Payment on any December Payment Date
and at the maturity of the Securities.
OIL INDUSTRY SECTOR
The oil industry is subject to varying degrees of regulatory, political
and economic risk which may affect the price of the stocks of the companies
engaged in the industry. Such risks depend on a number of factors including
the countries in which a particular company conducts its activities,
evolving levels of governmental regulation, and litigation with respect to
environmental and other matters. All segments of the oil industry are
competitive, including manufacturing, distribution and marketing of
petroleum products and petrochemicals. In addition, the oil industry
competes with other industries in supplying the energy needs of various
types of consumers. Refining margins (the difference between the price of
products and the price of crude oil) and marketing margins (the difference
between the wholesale and retail price of petroleum products) also affect
companies engaged in the oil industry.
The profitability of companies engaged in the oil industry is directly
affected by the worldwide price of oil and related petroleum products
which, in turn, depends upon the worldwide demand for oil and related
petroleum products.
Environmental regulation is a significant factor affecting profitability
of companies engaged in the oil industry. In the U.S., companies engaged in
the oil industry are subject to substantial environmental regulations by
federal, state, and local authorities. Federal regulations include the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (often referred to as CERCLA or Superfund), the Superfund
Amendments and Reauthorizations Act of 1986, and the Resource Conservation
Recovery Act of 1976.
In the United States and elsewhere, various laws and regulations are
either now in force, in standby status or under consideration, with respect
to such matters as price controls, crude oil and refined product
allocations, refined product specifications, environmental, health and
safety regulations, retroactive and prospective tax increases, cancellation
of contract rights, expropriation of property, divestiture of certain
operations, foreign exchange rate restrictions as to the convertibility of
currencies, tariffs and other international trade restrictions. Other
regulations such as the U.S. Federal Clean Air Act Amendments of 1990 may
have a substantial impact on companies engaged in the oil industry despite
the fact that they do not impose direct regulations. Finally, regional
regulations like those proposed by California's South Coast Air Quality
Management District may have substantial effects on the oil industry as
well.
OTHER TERMS
GENERAL
The Senior Debt Securities have been and are to be issued under an
Indenture (the "Senior Indenture"), dated as of April 1, 1983, as amended
and restated, between the Company and Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee (the "Trustee"). A copy of
the Senior Indenture is filed as an exhibit to the registration statements
relating to the Securities. The following summaries of certain provisions
of the Senior Indenture do not purport to be complete and are subject to,
and qualified in their entirety by reference to, all provisions of the
Senior Indenture, including the definition therein of certain terms.
The Senior Indenture provides that series of Senior Debt Securities may
from time to time be issued thereunder, without limitation as to aggregate
principal amount, in one or more series and upon such terms as the Company
may establish pursuant to the provisions thereof.
The Senior Indenture provides that the Senior Indenture and the
Securities will be governed by and construed in accordance with the laws of
the State of New York.
12
<PAGE>
The Senior Indenture provides that the Company may issue Senior Debt
Securities with terms different from those of Senior Debt Securities
previously issued, and "reopen" a previously issued series of Senior Debt
Securities and issue additional Senior Debt Securities of such series.
The Senior Debt Securities are unsecured and rank pari passu with all
other unsecured and unsubordinated indebtedness of the Company. However,
since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of Senior Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is
necessarily subject to the prior claims of creditors of the subsidiary,
except to the extent that claims of the Company itself as a creditor of the
subsidiary may be recognized. In addition, dividends, loans and advances
from certain subsidiaries, including MLPF&S, to the Company are restricted
by net capital requirements under the Securities Exchange Act of 1934, as
amended, and under rules of certain exchanges and other regulatory bodies.
LIMITATIONS UPON LIENS
The Company may not, and may not permit any Subsidiary to, create,
assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance (except for certain liens
specifically permitted by the Senior Indenture) on the Voting Stock owned
directly or indirectly by the Company of any Subsidiary (other than a
Subsidiary which, at the time of the incurrence of such secured
indebtedness, has a net worth of less than $3,000,000) without making
effective provision whereby the Outstanding Senior Debt Securities will be
secured equally and ratably with such secured indebtedness.
LIMITATION ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S
The Indenture provides that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue,
sell or otherwise dispose of any of its Voting Stock, unless, after giving
effect to any such transaction, MLPF&S remains a Controlled Subsidiary
(defined in the Senior Indenture to mean a corporation more than 80% of the
outstanding shares of Voting Stock of which are owned directly or
indirectly by the Company). In addition, the Company may not permit MLPF&S
to (i) merge or consolidate, unless the surviving company is a Controlled
Subsidiary or (ii) convey or transfer its properties and assets
substantially as an entirety, except to one or more Controlled
Subsidiaries.
MERGER AND CONSOLIDATION
The Indenture provides that the Company may consolidate or merge with or
into any other corporation, and the Company may sell, lease or convey all
or substantially all of its assets to any corporation, provided that (i)
the corporation (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received such assets shall
be a corporation organized and existing under the laws of the United States
of America or a state thereof and shall assume payment of the principal of
(and premium, if any) and interest on the Senior Debt Securities and the
performance and observance of all of the covenants and conditions of the
Senior Indenture to be performed or observed by the Company, and (ii) the
Company or such successor corporation, as the case may be, shall not
immediately thereafter be in default under the Senior Indenture.
MODIFICATION AND WAIVER
Modification and amendment of the Indenture may be effected by the
Company and the Trustee with the consent of the Holders of 66 2/3% in
principal amount of the Outstanding Senior Debt Securities of each series
issued pursuant to such indenture and affected thereby, provided that no
such modification or amendment may, without the consent of the Holder of
each Outstanding Senior Debt Security affected thereby, (a) change the
Stated Maturity of the principal of, or any installment of interest or
Additional Amounts payable on, any Senior Debt Security or any premium
payable on the redemption thereof, or change the Redemption Price; (b)
reduce the principal amount of, or the interest or Additional Amounts
payable on, any Senior Debt Security or reduce the amount of principal
which could be declared due and payable prior to the Stated Maturity; (c)
change place or currency of any payment of principal or any premium,
interest
13
<PAGE>
or Additional Amounts payable on any Senior Debt Security; (d) impair the
right to institute suit for the enforcement of any payment on or with
respect to any Senior Debt Security; (e) reduce the percentage in principal
amount of the Outstanding Senior Debt Securities of any series, the consent
of whose Holders is required to modify or amend the Indenture; or (f)
modify the foregoing requirements or reduce the percentage of Outstanding
Senior Debt Securities necessary to waive any past default to less than a
majority. No modification or amendment of the Subordinated Indenture or
any Subsequent Indenture for Subordinated Debt Securities may adversely
affect the rights of any holder of Senior Indebtedness without the consent
of such Holder. Except with respect to certain fundamental provisions, the
Holders of at least a majority in principal amount of Outstanding Senior
Debt Securities of any series may, with respect to such series, waive past
defaults under the Indenture and waive compliance by the Company with
certain provisions thereof.
EVENTS OF DEFAULT
Under the Senior Indenture, the following will be Events of Default with
respect to Senior Debt Securities of any series: (a) default in the payment
of any interest or Additional Amounts payable on any Senior Debt Security
of that series when due, continued for 30 days; (b) default in the payment
of any principal or premium, if any, on any Senior Debt Security of that
series when due; (c) default in the deposit of any sinking fund payment,
when due, in respect of any Senior Debt Security of that series; (d)
default in the performance of any other covenant of the Company contained
in the Indenture for the benefit of such series or in the Senior Debt
Securities of such series, continued for 60 days after written notice as
provided in the Senior Indenture; (e) certain events in bankruptcy,
insolvency or reorganization; and (f) any other Event of Default provided
with respect to Senior Debt Securities of that series. The Trustee or the
Holders of 25% in principal amount of the Outstanding Senior Debt
Securities of that series may declare the principal amount (or such lesser
amount as may be provided for in the Senior Debt Securities of that series)
of all Outstanding Senior Debt Securities of that series and the interest
due thereon and Additional Amounts payable in respect thereof, if any to be
due and payable immediately if an Event of Default with respect to Senior
Debt Securities of such series shall occur and be continuing at the time of
such declaration. At any time after a declaration of acceleration has been
made with respect to Senior Debt Securities of any series but before a
judgment or decree for payment of money due has been obtained by the
Trustee, the Holders of a majority in principal amount of the Outstanding
Senior Debt Securities of that series may rescind any declaration of
acceleration and its consequences, if all payments due (other than those
due as a result of acceleration) have been made and all Events of Default
have been remedied or waived. Any Event of Default with respect to Senior
Debt Securities of any series may be waived by the Holders of a majority in
principal amount of all Outstanding Senior Debt Securities of that series,
except in a case of failure to pay principal or premium, if any, or
interest or Additional Amounts payable on any Senior Debt Security of that
series for which payment had not been subsequently made or in respect of a
covenant or provision which cannot be modified or amended without the
consent of the Holder of each Outstanding Senior Debt Security of such
series affected.
The Holders of a majority in principal amount of the Outstanding Senior
Debt Securities of a series may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee with respect to
Senior Debt Securities of such series, provided that such direction shall
not be in conflict with any rule of law or the Senior Indenture. Before
proceeding to exercise any right or power under the Senior Indenture at the
direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses
and liabilities which might be incurred by it in complying with any such
direction.
The Company is required to furnish to the Trustee annually a statement as
to the fulfillment by the Company of all of its obligations under the
Senior Indenture.
14
<PAGE>
EXPERTS
The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1994 Annual Report on Form 10-K and incorporated
by reference in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports incorporated by reference
herein. The Selected Financial Data under the captions "Operating
Results", "Financial Position" and "Common Share Data" for each of the five
years in the period ended December 30, 1994 included in the 1994 Annual
Report to Stockholders of the Company and incorporated by reference herein,
has been derived from consolidated financial statements audited by Deloitte
& Touche LLP, as set forth in their reports incorporated by reference
herein. Such consolidated financial statements and related financial
statement schedules, and such Selected Financial Data incorporated by
reference in this Prospectus and the Registration Statement of which this
Prospectus is a part, have been included or incorporated herein by
reference in reliance upon such reports of Deloitte & Touche LLP given upon
their authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the periods
included in any of the Quarterly Reports on Form 10-Q which may be
incorporated herein by reference, Deloitte & Touche LLP have applied
limited procedures in accordance with professional standards for a review
of such information. However, as stated in their report included in any
such Quarterly Report on Form 10-Q and incorporated by reference herein,
they did not audit and they do not express an opinion on such interim
financial information. Accordingly, the degree of reliance on their
reports on such information should be restricted in light of the limited
nature of the review procedures applied. Deloitte & Touche LLP are not
subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report
is not a "report" or a "part" of the registration statement prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the
Act.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses in connection with the issuance
and distribution of the securities being registered. All the amounts shown are
estimates, except the registration fee and the NASD fee.
<TABLE>
<S> <C>
Registration fee............................................... $1,379,320
Fees and expenses of accountants............................... 70,000
Fees and expenses of counsel................................... 400,000
NASD fee....................................................... 30,500
Blue Sky and legal investment fees and expenses................ 40,000
Fees and expenses of Trustees and Warrant Agent................ 225,000
Printing expenses.............................................. 400,000
Printing and engraving of Securities........................... 2,500
Rating agency fees............................................. 1,120,000
Miscellaneous.................................................. 600,000
----------
Total....................................................... $4,267,320
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or
is or was serving at its request in such capacity in another corporation or
business association, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe such person's
conduct was unlawful.
Article XIII, Section 2 of the Restated Certificate of Incorporation of the
Registrant provides in effect that, subject to certain limited exceptions, the
Registrant shall indemnify its directors and officers to the extent authorized
or permitted by the General Corporation Law of the State of Delaware.
The Form of Underwriting Agreement filed as Exhibit 1 provides for the
indemnification of the Registrant, its controlling persons, its directors and
certain of its officers by the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
The directors and officers of the Registrant are insured under policies of
insurance maintained by the Registrant, subject to the limits of the policies,
against certain losses arising from any claim made against them by reason of
being or having been such directors or officers. In addition, the Registrant
has entered into contracts with all of its directors providing for
indemnification of such persons by the Registrant to the full extent authorized
or permitted by law, subject to certain limited exceptions.
II-1
<PAGE>
ITEM 16. LIST OF EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
1(a)(i) --Form of Underwriting Exhibit 1(a)(i) to Amendment No. 1 to
Agreement for Debt Registrant's Registration Statement on
Securities and Warrants, Form S-3 (No. 33-54218).
including forms of Terms
Agreement and Delayed
Delivery Contract.
1(b) --Form of Distribution Exhibit 1(b) to Registrant's
Agreement, including form Registration Statement on Form S-3
of Terms Agreement, (No. 33-51489).
relating to Medium-Term
Notes, Series B (a series
of Senior Debt
Securities).
4(a)(i) --Senior Indenture, dated Exhibit 99(c) to Registrant's
as of April 1, 1983, as Registration Statement on Form 8-A
amended and restated, dated July 20, 1992.
between the Company and
Chemical Bank (successor
by merger to Manufacturers
Hanover Trust Company).
4(a)(ii) --Senior Indenture, dated Exhibit 4 to Registrant's Current
as of October 1, 1993, Report on Form 8-K dated October 7,
between the Company and 1993.
The Chase Manhattan Bank,
N.A.
4(a)(iii) --Form of Subsequent *
Indenture with respect to
Senior Debt Securities.
4(a)(iv) --Form of Subsequent *
Indenture with respect to
Senior Debt Securities.
4(b)(i) --Supplemental Indenture to Exhibit 99(c) to Registrant's
the Senior Indenture dated Registration Statement on Form 8-A
March 15, 1990 between the dated July 20, 1992.
Company and Chemical Bank
(successor by merger to
Manufacturers Hanover
Trust Company).
4(b)(ii) --Supplemental Indenture to *
the Senior Indenture dated
October 25, 1993 between
the Company and The Chase
Manhattan Bank, N.A.
4(c)(i) --Form of Subordinated Exhibit 4(c)(i) to Registrant's
Indenture between the Registration Statement on Form S-3
Company and Chemical Bank. (No. 33-42041).
4(c)(ii) --Form of Subsequent Exhibit 4(c)(ii) to Registrant's
Indentures with respect to Registration Statement on Form S-3
Subordinated Debt (No. 33-42041).
Securities.
4(d) --Form of 5 1/4% Note due Exhibit 4 to Registrant's Current
October 30, 1995. Report on Form 8-K dated October 30,
1992.
4(e) --Form of 5 7/8% Note due Exhibit 4 of Registrant's Current
December 1, 1995. Report on Form 8-K dated December 1,
1992.
4(f) --Form of 4 3/4% Note due Exhibit 4 to Registrant's Current
June 24, 1996. Report on Form 8-K dated June 24,
1993.
4(g) --Form of 5% Note due Exhibit 4 to Registrant's Current
December 15, 1996. Report on Form 8-K dated December 22,
1993.
4(h) --Form of Constant Maturity Exhibit 4 to Registrant's Current
Treasury Rate Indexed Note Report on Form 8-K dated March 24,
due March 24, 1997. 1994.
4(i) --Form of 7.25% Note due Exhibit 4 to Registrant's Current
May 15, 1997. Report on Form 8-K dated May 21, 1992.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
4(j) --Form of Market Index Exhibit 4 to Registrant's Current
Target-Term Security due Report on Form 8-K dated July 30,
August 29, 1997. 1992.
4(k) --Form of Stock Market Annual Exhibit 4 to Registrant's Current
Reset Term Note due December Report on Form 8-K dated October 29,
31, 1997. 1992.
4(l) --Form of 9% Note due May 1, Exhibit 4(x) to Registrant's
1998. Registration Statement on Form S-3
(No. 33-45327).
4(m) --Form of S&P 500 Market Exhibit 4 to Registrant's Current
Index Target-Term Security Report on Form 8-K dated January 28,
due July 31, 1998. 1993.
4(n) --Form of Global Exhibit 4 to Registrant's Current
Telecommunications Portfolio Report on Form 8-K dated September 13,
Market Index Target-Term 1993.
Security due October 15,
1998.
4(o) --Form of Global Bond Linked Exhibit 4 to Registrant's Current
Security due December 31, Report on Form 8-K dated February 22,
1998. 1993.
4(p) --Form of Currency Protected Exhibit 4 to Registrant's Current
Note due December 31, 1998. Report on Form 8-K dated July 7, 1993.
4(q) --Form of 10 3/8% Note due Exhibit 4(y) to Registrant's
February 1, 1999. Registration Statement on Form S-3
(No. 33-45327).
4(r) --Form of 7 3/4% Note due Exhibit 4 to Registrant's Current
March 1, 1999. Report on Form 8-K dated March 2,
1992.
4(s) --Form of 6 3/8% Note due Exhibit 4 to Registrant's Current
March 30, 1999. Report on Form 8-K dated March 30,
1994.
4(t) --Form of Equity Exhibit 4(ooo) to Amendment No. 1 to
Participation Security with Registrant's Registration Statement on
Minimum Return Protection Form S-3 (No. 33-54218).
due June 30, 1999.
4(u) --Form of European Portfolio Exhibit 4 to Registrant's Current
Market Index Target-Term Report on Form 8-K dated December 30,
Security due June 30, 1999. 1993.
4(v) --Form of 8 1/4% Note due Exhibit 4(cc) to Registrant's
November 15, 1999. Registration Statement on Form S-3
(No. 33-45327).
4(w) --Form of Stock Market Annual Exhibit 4 to Registrant's Current
Reset Term Note due December Report on Form 8-K dated April 29,
31, 1999 (Series A). 1993.
4(x) --Form of Step-Up Note due Exhibit 4 to Registrant's Current
January 26, 2000. Report on Form 8-K dated January 26,
1993.
4(y) --Form of Japan Index Equity Exhibit 4 to Registrant's Current
Participation Security with Report on Form 8-K dated January 27,
Minimum Return Protection 1994.
due January 31, 2000.
4(z) --Form of 8 3/8% Note due Exhibit 4 to Registrant's Current
February 9, 2000. Report on Form 8-K dated February 9,
1995.
4(aa) --Form of 6.70% Note due Exhibit 4 to Registrant's Current
August 1, 2000. Report on Form 8-K dated August 1,
1995.
4(bb) --Form of AMEX Oil Index Exhibit 4 to Registrant's Current
Stock Market Annual Reset Report on Form 8-K dated March 31,
Term Note due December 29, 1994.
2000.
4(cc) --Form of 8% Note due Exhibit 4 to Registrant's Current
February 1, 2002. Report on Form 8-K dated February 4,
1992.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
4(dd) --Form of Step-Up Note due Exhibit 4 to Registrant's Current
April 30, 2002. Report on Form 8-K dated April 30,
1992.
4(ee) --Form of Step-Up Note due Exhibit 4 to Registrant's Current
May 6, 2002. Report on Form 8-K dated May 6, 1992.
4(ff) --Form of 7 3/8% Note due Exhibit 4 to Registrant's Current
August 17, 2002. Report on Form 8-K dated August 17,
1992.
4(gg) --Form of 8.30% Note due Exhibit 4 to Registrant's Current
November 1, 2002. Report on Form 8-K dated May 4, 1992.
4(hh) --Form of 6 7/8% Note due Exhibit 4 to Registrant's Current
March 1, 2003. Report on Form 8-K dated March 1,
1993.
4(ii) --Form of 7.05% Note due Exhibit 4 to Registrant's Current
April 15, 2003. Report on Form 8-K dated April 15,
1993.
4(jj) --Form of 6 1/4% Note due Exhibit 4 to Registrant's Current
January 15, 2006. Report on Form 8-K dated January 20,
1994.
4(kk) --Form of 6 3/8% Note due Exhibit 4 to Registrant's Current
September 8, 2006. Report on Form 8-K dated September 8,
1993.
4(ll) --Form of 8% Note due June 1, Exhibit 4 to Registrant's Current
2007. Report on Form 8-K dated June 1, 1992.
4(mm) --Form of 7% Note due April Exhibit 4 to Registrant's Current
27, 2008. Report on Form 8-K dated April 27,
1993.
4(nn) --Form of 6 1/4% Note due Exhibit 4 to Registrant's Current
October 15, 2008. Report on Form 8-K dated October 15,
1993.
4(oo) --Form of 8.40% Note due Exhibit 4(z) to Registrant's
November 1, 2019. Registration Statement on Form S-3
(No. 33-35456).
4(pp) --Form of Fixed Rate Medium- Exhibit 4(kk) to Registrant's
Term Note (without Registration Statement on Form S-3
redemption provisions). (No. 33-54218).
4(qq) --Form of Fixed Rate Medium- Exhibit 4(ll) to Registrant's
Term Note (with redemption Registration Statement on Form S-3
provisions). (No. 33-54218).
4(rr) --Form of Fixed Rate Medium- Exhibit 4(d) to Registrant's
Term Note (without Registration Statement on Form S-3
redemption provisions, (No. 33-38879).
minimum denomination
$1,000).
4(ss) --Form of Fixed Rate Medium- Exhibit 4(e) to Registrant's
Term Note (with redemption Registration Statement on Form S-3
provisions, minimum (No. 33-38879).
denomination $1,000).
4(tt) --Form of Fixed Rate Medium- Exhibit 4(xiii) to Registrant's
Term Note, Series B. Quarterly Report on Form 10-Q for the
quarter ended September 24, 1993.
4(uu) --Form of Federal Funds Rate Exhibit 4(oo) to Registrant's
Medium- Registration Statement on Form S-3
Term Note. (No. 33-54218).
4(vv) --Form of Floating Rate Exhibit 4(xiv) to Registrant's
Medium-Term Note, Series B. Quarterly Report on Form 10-Q for the
quarter ended September 24, 1993.
4(ww) --Form of Commercial Paper Exhibit 4(qq) to Registrant's
Rate Medium- Registration Statement on Form S-3
Term Note. (No. 33-54218).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
4(xx) --Form of Commercial Paper Exhibit 4(i) to Registrant's
Index Rate Medium-Term Note. Registration Statement on Form S-3
(File No. 33-38879).
4(yy) --Form of Constant Maturity Exhibit 4(ccc) to Registrant's
Treasury Rate Indexed Registration Statement on Form S-3
Medium-Term Note, Series B. (No. 33-52647).
4(zz) --Form of Constant Maturity Exhibit 4(xv) to Registrant's Annual
Treasury Rate Indexed Report on Form 10-K for the year ended
Medium-Term Note II, Series December 30, 1994.
B.
4(aaa) --Form of JPY Yield Curve Exhibit 4(ddd) to Registrant's
Flattening Medium-Term Note, Registration Statement on Form S-3
Series B. (No. 33-52647).
4(bbb) --Form of LIBOR Medium-Term Exhibit 4(pp) to Registrant's
Note. Registration Statement on Form S-3
(No. 33-54218).
4(ccc) --Form of Multi-Currency Exhibit 4(fff) to Registrant's
Medium-Term Note, Series B. Registration Statement on Form S-3
(No. 33-52647).
4(ddd) --Form of Nine Month Exhibit 4(ix) to Registrant's
Renewable Floating Rate Quarterly Report on Form 10-Q for the
Medium-Term Note, Series B. quarter ended September 24, 1993.
4(eee) --Form of Treasury Rate Exhibit 4(aaa) to Registrant's
Medium-Term Note. Registration Statement on Form S-3
(No. 33-54218).
4(fff) --Form of Collared LIBOR Exhibit 4(ww) to Registrant's
Medium-Term Note due Registration Statement on Form S-3
February 14, 2000. (No. 33-54218).
4(ggg) --Form of Inverse Floating Exhibit 4(vii) to Registrant's
Rate Medium-Term Note due Quarterly Report on Form 10-Q for the
September 15, 1998. quarter ended September 24, 1993.
4(hhh) --Form of Inverse Floating Exhibit 4(xii) to Registrant's
Rate Medium-Term Note, Quarterly Report on Form 10-Q for the
Series B, due October 19, quarter ended September 24, 1993.
1998.
4(iii) --Form of Japanese Yen Swap Exhibit 4(mmm) to Registrant's
Rate Linked Medium-Term Registration Statement on Form S-3
Note, Series B. (No. 33-52647).
4(jjj) --Form of LIBOR Medium-Term Exhibit 4(xx) to Registrant's
Note due August 4, 1997. Registration Statement on Form S-3
(No. 33-54218).
4(kkk) --Form of Three Year Japanese Exhibit 4(xv) to Registrant's
Yen Duration Enhanced Quarterly Report on Form 10-Q for the
Medium-Term Note, Series B, quarter ended September 24, 1993.
with JPY Exposure on
Gain/Loss due
November 1, 1996.
4(lll) --Form of Step-Up Medium-Term Exhibit 4(ggg) to Amendment No. 1 to
Note due May 20, 2008. Registrant's Registration Statement on
Form S-3 (No. 33-54218).
4(mmm) --Form of Swap Spread Linked Exhibit 4(hhh) to Amendment No. 1 to
Medium-Term Note due May 20, Registrant's Registration Statement on
1998. Form S-3 (No. 33-54218).
4(nnn) --Form of Warrant Agreement, Exhibit 4(aa) to Registrant's
including form of Warrant Registration Statement on Form S-3
Certificate. (No. 33-35456).
4(ooo) --Form of Currency [Put/Call] Exhibit 4 to Registrant's Registration
Warrant Agreement, including Statement on Form S-3 (No. 33-17965).
form of Global Currency
Warrant Certificate.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
4(ppp) --Form of Currency Put Exhibit 4 to Registrant's Current
Warrant Agreement, including Report on Form 8-K dated May 23, 1995.
form of Global Currency
Warrant Certificate,
relating to Greater of U.S.
Dollar/Deutsche Mark--U.S.
Dollar/Japanese Yen Put
Currency Warrants, Expiring
May 15, 1997.
4(qqq) --Form of Index Warrant Exhibit 4(lll) to Amendment No. 1 to
Agreement, including form of Registrant's Registration Statement on
Global Index Warrant Form S-3 (No. 33-54218).
Certificate.
4(rrr) --Form of Index Warrant Trust Exhibit 4(mmm) to Amendment No. 1 to
Indenture, including form of Registrant's Registration Statement on
Global Index Warrant Form S-3 (No. 33-54218).
Certificate.
4(sss) --Form of Index Warrant Exhibit 4 to Registrant's Current
Agreement, including form of Report on Form 8-K dated February 3,
Global Index Warrant 1994.
Certificate, relating to
Constant Maturity U.S.
Treasury Yield Increase
Warrants, Expiring August
25, 1995.
4(ttt) --Form of Index Warrant Exhibit 4 to Registrant's Current
Agreement, including form of Report on Form 8-K dated November 3,
Global Index Warrant 1994.
Certificate, relating to
Constant Maturity U.S.
Treasury Yield Increase
Warrants, Expiring January
25, 1996.
4(uuu) --Form of Index Warrant Exhibit 4 to Registrant's Current
Agreement, including form of Report on Form 8-K dated December 27,
Global Index Warrant 1993.
Certificate, relating to
AMEX Hong Kong 30 Index Call
Warrants with Optional
Reset, Expiring December 15,
1995.
4(vvv) --Form of Index Warrant Exhibit 4 to Registrant's Current
Agreement, including form of Report on Form 8-K dated February 8,
Global Warrant Certificate, 1995.
relating to Nikkei Stock
Index 300 Call Warrants,
Expiring February 3, 1997.
5 --Opinion of Brown & Wood. *
12 --Computation of Ratio of *
Earnings to Fixed Charges.
15 --Letter of Deloitte & Touche
LLP regarding unaudited
interim financial
information.
23(a) --Consent of Brown & Wood. *
23(b) --Consent of Deloitte & *
Touche LLP.
24 --Power of Attorney. *
25(a) --Form T-1 Statement of *
Eligibility and
Qualification under the
Trust Indenture Act of 1939
of Chemical Bank.
25(b) --Form T-1 Statement of *
Eligibility and
Qualification under the
Trust Indenture Act of 1939
of The Chase Manhattan Bank,
N.A.
99(a) --Opinion of Deloitte & *
Touche llp with respect to
certain financial data
appearing in the
Registration Statement.
99(b) --Opinion of Deloitte & Exhibit 28 to Registrant's Annual
Touche llp with respect to Report on Form 10-K for the year ended
certain summary financial December 30, 1994 (File No. 1-7182).
information and selected
financial data incorporated
by reference in the
Registration Statement.
</TABLE>
- --------
* Previously filed.
II-6
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 and the information required to be
included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the Securities being registered which remain unsold at the termination of the
offering.
II-7
<PAGE>
(b) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 15 of this
registration statement, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(d) To file an application for the purpose of determining the eligibility of
the trustee to act under subsection (a) of Section 310 of the Trust Indenture
Act (the "Act") in accordance with the rules and regulations prescribed by the
Commission under Section 305(b)(2) of the Act.
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 2 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in The City of New York and State of New York on the
22nd day of August 1995.
MERRILL LYNCH & CO., INC.
/s/ Stephen L. Hammerman
By ..................................
STEPHEN L. HAMMERMAN
(Vice Chairman of the Board and
General Counsel)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 2 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSON IN THE CAPACITIES INDICATED ON THE 22ND DAY OF AUGUST 1995.
SIGNATURE TITLE
Chairman of the Board,
Daniel P. Tully* Chief Executive Officer
- ------------------------------------- and Director
(DANIEL P. TULLY)
President, Chief
David H. Komansky* Operating Officer and
- ------------------------------------- Director
(DAVID H. KOMANSKY)
Senior Vice President
Joseph T. Willett* and Chief Financial
- ------------------------------------- Officer (Principal
(JOSEPH T. WILLETT) Financial and Accounting
Officer)
Director
William O. Bourke*
- -------------------------------------
(WILLIAM O. BOURKE)
Director
Jill K. Conway*
- -------------------------------------
(JILL K. CONWAY)
/s/ Stephen L. Hammerman Director
- -------------------------------------
(STEPHEN L. HAMMERMAN)
Director
Earle H. Harbison, Jr.*
- -------------------------------------
(EARLE H. HARBISON, JR.)
II-9
<PAGE>
SIGNATURE TITLE
Director
George B. Harvey*
- -------------------------------------
(GEORGE B. HARVEY)
Director
William R. Hoover*
- -------------------------------------
(WILLIAM R. HOOVER)
Director
Robert P. Luciano*
- -------------------------------------
(ROBERT P. LUCIANO)
Director
Aulana L. Peters*
- -------------------------------------
(AULANA L. PETERS)
Director
John J. Phelan, Jr.*
- -------------------------------------
(JOHN J. PHELAN, JR.)
Director
William L. Weiss*
- -------------------------------------
(WILLIAM L. WEISS)
Director
- -------------------------------------
(W.H. CLARK)
/s/ Stephen L. Hammerman
*By ----------------------------
STEPHEN L. HAMMERMAN
(ATTORNEY-IN-FACT)
II-10
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
1(a)(i) --Form of Underwriting Exhibit 1(a)(i) to Amendment No. 1 to
Agreement for Debt Registrant's Registration Statement on
Securities and Warrants, Form S-3 (No. 33-54218).
including forms of Terms
Agreement and Delayed
Delivery Contract.
1(b) --Form of Distribution Exhibit 1(b) to Registrant's
Agreement, including form Registration Statement on Form S-3
of Terms Agreement, (No. 33-51489).
relating to Medium-Term
Notes, Series B (a series
of Senior Debt
Securities).
4(a)(i) --Senior Indenture, dated Exhibit 99(c) to Registrant's
as of April 1, 1983, as Registration Statement on Form 8-A
amended and restated, dated July 20, 1992.
between the Company and
Chemical Bank (successor
by merger to Manufacturers
Hanover Trust Company).
4(a)(ii) --Senior Indenture, dated Exhibit 4 to Registrant's Current
as of October 1, 1993, Report on Form 8-K dated October 7,
between the Company and 1993.
The Chase Manhattan Bank,
N.A.
4(a)(iii) --Form of Subsequent *
Indenture with respect to
Senior Debt Securities.
4(a)(iv) --Form of Subsequent *
Indenture with respect to
Senior Debt Securities.
4(b)(i) --Supplemental Indenture to Exhibit 99(c) to Registrant's
the Senior Indenture dated Registration Statement on Form 8-A
March 15, 1990 between the dated July 20, 1992.
Company and Chemical Bank
(successor by merger to
Manufacturers Hanover
Trust Company).
4(b)(ii) --Supplemental Indenture to *
the Senior Indenture dated
October 25, 1993 between
the Company and The Chase
Manhattan Bank, N.A.
4(c)(i) --Form of Subordinated Exhibit 4(c)(i) to Registrant's
Indenture between the Registration Statement on Form S-3
Company and Chemical Bank. (No. 33-42041).
4(c)(ii) --Form of Subsequent Exhibit 4(c)(ii) to Registrant's
Indentures with respect to Registration Statement on Form S-3
Subordinated Debt (No. 33-42041).
Securities.
4(d) --Form of 5 1/4% Note due Exhibit 4 to Registrant's Current
October 30, 1995. Report on Form 8-K dated October 30,
1992.
4(e) --Form of 5 7/8% Note due Exhibit 4 of Registrant's Current
December 1, 1995. Report on Form 8-K dated December 1,
1992.
4(f) --Form of 4 3/4% Note due Exhibit 4 to Registrant's Current
June 24, 1996. Report on Form 8-K dated June 24,
1993.
4(g) --Form of 5% Note due Exhibit 4 to Registrant's Current
December 15, 1996. Report on Form 8-K dated December 22,
1993.
4(h) --Form of Constant Maturity Exhibit 4 to Registrant's Current
Treasury Rate Indexed Note Report on Form 8-K dated March 24,
due March 24, 1997. 1994.
4(i) --Form of 7.25% Note due Exhibit 4 to Registrant's Current
May 15, 1997. Report on Form 8-K dated May 21, 1992.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
4(j) --Form of Market Index Exhibit 4 to Registrant's Current
Target-Term Security due Report on Form 8-K dated July 30,
August 29, 1997. 1992.
4(k) --Form of Stock Market Annual Exhibit 4 to Registrant's Current
Reset Term Note due December Report on Form 8-K dated October 29,
31, 1997. 1992.
4(l) --Form of 9% Note due May 1, Exhibit 4(x) to Registrant's
1998. Registration Statement on Form S-3
(No. 33-45327).
4(m) --Form of S&P 500 Market Exhibit 4 to Registrant's Current
Index Target-Term Security Report on Form 8-K dated January 28,
due July 31, 1998. 1993.
4(n) --Form of Global Exhibit 4 to Registrant's Current
Telecommunications Portfolio Report on Form 8-K dated September 13,
Market Index Target-Term 1993.
Security due October 15,
1998.
4(o) --Form of Global Bond Linked Exhibit 4 to Registrant's Current
Security due December 31, Report on Form 8-K dated February 22,
1998. 1993.
4(p) --Form of Currency Protected Exhibit 4 to Registrant's Current
Note due December 31, 1998. Report on Form 8-K dated July 7, 1993.
4(q) --Form of 10 3/8% Note due Exhibit 4(y) to Registrant's
February 1, 1999. Registration Statement on Form S-3
(No. 33-45327).
4(r) --Form of 7 3/4% Note due Exhibit 4 to Registrant's Current
March 1, 1999. Report on Form 8-K dated March 2,
1992.
4(s) --Form of 6 3/8% Note due Exhibit 4 to Registrant's Current
March 30, 1999. Report on Form 8-K dated March 30,
1994.
4(t) --Form of Equity Exhibit 4(ooo) to Amendment No. 1 to
Participation Security with Registrant's Registration Statement on
Minimum Return Protection Form S-3 (No. 33-54218).
due June 30, 1999.
4(u) --Form of European Portfolio Exhibit 4 to Registrant's Current
Market Index Target-Term Report on Form 8-K dated December 30,
Security due June 30, 1999. 1993.
4(v) --Form of 8 1/4% Note due Exhibit 4(cc) to Registrant's
November 15, 1999. Registration Statement on Form S-3
(No. 33-45327).
4(w) --Form of Stock Market Annual Exhibit 4 to Registrant's Current
Reset Term Note due December Report on Form 8-K dated April 29,
31, 1999 (Series A). 1993.
4(x) --Form of Step-Up Note due Exhibit 4 to Registrant's Current
January 26, 2000. Report on Form 8-K dated January 26,
1993.
4(y) --Form of Japan Index Equity Exhibit 4 to Registrant's Current
Participation Security with Report on Form 8-K dated January 27,
Minimum Return Protection 1994.
due January 31, 2000.
4(z) --Form of 8 3/8% Note due Exhibit 4 to Registrant's Current
February 9, 2000. Report on Form 8-K dated February 9,
1995.
4(aa) --Form of 6.70% Note due Exhibit 4 to Registrant's Current
August 1, 2000. Report on Form 8-K dated August 1,
1995.
4(bb) --Form of AMEX Oil Index Exhibit 4 to Registrant's Current
Stock Market Annual Reset Report on Form 8-K dated March 31,
Term Note due December 29, 1994.
2000.
4(cc) --Form of 8% Note due Exhibit 4 to Registrant's Current
February 1, 2002. Report on Form 8-K dated February 4,
1992.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
4(dd) --Form of Step-Up Note due Exhibit 4 to Registrant's Current
April 30, 2002. Report on Form 8-K dated April 30,
1992.
4(ee) --Form of Step-Up Note due Exhibit 4 to Registrant's Current
May 6, 2002. Report on Form 8-K dated May 6, 1992.
4(ff) --Form of 7 3/8% Note due Exhibit 4 to Registrant's Current
August 17, 2002. Report on Form 8-K dated August 17,
1992.
4(gg) --Form of 8.30% Note due Exhibit 4 to Registrant's Current
November 1, 2002. Report on Form 8-K dated May 4, 1992.
4(hh) --Form of 6 7/8% Note due Exhibit 4 to Registrant's Current
March 1, 2003. Report on Form 8-K dated March 1,
1993.
4(ii) --Form of 7.05% Note due Exhibit 4 to Registrant's Current
April 15, 2003. Report on Form 8-K dated April 15,
1993.
4(jj) --Form of 6 1/4% Note due Exhibit 4 to Registrant's Current
January 15, 2006. Report on Form 8-K dated January 20,
1994.
4(kk) --Form of 6 3/8% Note due Exhibit 4 to Registrant's Current
September 8, 2006. Report on Form 8-K dated September 8,
1993.
4(ll) --Form of 8% Note due June 1, Exhibit 4 to Registrant's Current
2007. Report on Form 8-K dated June 1, 1992.
4(mm) --Form of 7% Note due April Exhibit 4 to Registrant's Current
27, 2008. Report on Form 8-K dated April 27,
1993.
4(nn) --Form of 6 1/4% Note due Exhibit 4 to Registrant's Current
October 15, 2008. Report on Form 8-K dated October 15,
1993.
4(oo) --Form of 8.40% Note due Exhibit 4(z) to Registrant's
November 1, 2019. Registration Statement on Form S-3
(No. 33-35456).
4(pp) --Form of Fixed Rate Medium- Exhibit 4(kk) to Registrant's
Term Note (without Registration Statement on Form S-3
redemption provisions). (No. 33-54218).
4(qq) --Form of Fixed Rate Medium- Exhibit 4(ll) to Registrant's
Term Note (with redemption Registration Statement on Form S-3
provisions). (No. 33-54218).
4(rr) --Form of Fixed Rate Medium- Exhibit 4(d) to Registrant's
Term Note (without Registration Statement on Form S-3
redemption provisions, (No. 33-38879).
minimum denomination
$1,000).
4(ss) --Form of Fixed Rate Medium- Exhibit 4(e) to Registrant's
Term Note (with redemption Registration Statement on Form S-3
provisions, minimum (No. 33-38879).
denomination $1,000).
4(tt) --Form of Fixed Rate Medium- Exhibit 4(xiii) to Registrant's
Term Note, Series B. Quarterly Report on Form 10-Q for the
quarter ended September 24, 1993.
4(uu) --Form of Federal Funds Rate Exhibit 4(oo) to Registrant's
Medium- Registration Statement on Form S-3
Term Note. (No. 33-54218).
4(vv) --Form of Floating Rate Exhibit 4(xiv) to Registrant's
Medium-Term Note, Series B. Quarterly Report on Form 10-Q for the
quarter ended September 24, 1993.
4(ww) --Form of Commercial Paper Exhibit 4(qq) to Registrant's
Rate Medium- Registration Statement on Form S-3
Term Note. (No. 33-54218).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
4(xx) --Form of Commercial Paper Exhibit 4(i) to Registrant's
Index Rate Medium-Term Note. Registration Statement on Form S-3
(File No. 33-38879).
4(yy) --Form of Constant Maturity Exhibit 4(ccc) to Registrant's
Treasury Rate Indexed Registration Statement on Form S-3
Medium-Term Note, Series B. (No. 33-52647).
4(zz) --Form of Constant Maturity Exhibit 4(xv) to Registrant's Annual
Treasury Rate Indexed Report on Form 10-K for the year ended
Medium-Term Note II, Series December 30, 1994.
B.
4(aaa) --Form of JPY Yield Curve Exhibit 4(ddd) to Registrant's
Flattening Medium-Term Note, Registration Statement on Form S-3
Series B. (No. 33-52647).
4(bbb) --Form of LIBOR Medium-Term Exhibit 4(pp) to Registrant's
Note. Registration Statement on Form S-3
(No. 33-54218).
4(ccc) --Form of Multi-Currency Exhibit 4(fff) to Registrant's
Medium-Term Note, Series B. Registration Statement on Form S-3
(No. 33-52647).
4(ddd) --Form of Nine Month Exhibit 4(ix) to Registrant's
Renewable Floating Rate Quarterly Report on Form 10-Q for the
Medium-Term Note, Series B. quarter ended September 24, 1993.
4(eee) --Form of Treasury Rate Exhibit 4(aaa) to Registrant's
Medium-Term Note. Registration Statement on Form S-3
(No. 33-54218).
4(fff) --Form of Collared LIBOR Exhibit 4(ww) to Registrant's
Medium-Term Note due Registration Statement on Form S-3
February 14, 2000. (No. 33-54218).
4(ggg) --Form of Inverse Floating Exhibit 4(vii) to Registrant's
Rate Medium-Term Note due Quarterly Report on Form 10-Q for the
September 15, 1998. quarter ended September 24, 1993.
4(hhh) --Form of Inverse Floating Exhibit 4(xii) to Registrant's
Rate Medium-Term Note, Quarterly Report on Form 10-Q for the
Series B, due October 19, quarter ended September 24, 1993.
1998.
4(iii) --Form of Japanese Yen Swap Exhibit 4(mmm) to Registrant's
Rate Linked Medium-Term Registration Statement on Form S-3
Note, Series B. (No. 33-52647).
4(jjj) --Form of LIBOR Medium-Term Exhibit 4(xx) to Registrant's
Note due August 4, 1997. Registration Statement on Form S-3
(No. 33-54218).
4(kkk) --Form of Three Year Japanese Exhibit 4(xv) to Registrant's
Yen Duration Enhanced Quarterly Report on Form 10-Q for the
Medium-Term Note, Series B, quarter ended September 24, 1993.
with JPY Exposure on
Gain/Loss due
November 1, 1996.
4(lll) --Form of Step-Up Medium-Term Exhibit 4(ggg) to Amendment No. 1 to
Note due May 20, 2008. Registrant's Registration Statement on
Form S-3 (No. 33-54218).
4(mmm) --Form of Swap Spread Linked Exhibit 4(hhh) to Amendment No. 1 to
Medium-Term Note due May 20, Registrant's Registration Statement on
1998. Form S-3 (No. 33-54218).
4(nnn) --Form of Warrant Agreement, Exhibit 4(aa) to Registrant's
including form of Warrant Registration Statement on Form S-3
Certificate. (No. 33-35456).
4(ooo) --Form of Currency [Put/Call] Exhibit 4 to Registrant's Registration
Warrant Agreement, including Statement on Form S-3 (No. 33-17965).
form of Global Currency
Warrant Certificate.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INCORPORATION BY REFERENCE
NUMBER DESCRIPTION TO FILINGS INDICATED
------- ----------- --------------------------
<C> <S> <C>
4(ppp) --Form of Currency Put Exhibit 4 to Registrant's Current
Warrant Agreement, including Report on Form 8-K dated May 23, 1995.
form of Global Currency
Warrant Certificate,
relating to Greater of U.S.
Dollar/Deutsche Mark--U.S.
Dollar/Japanese Yen Put
Currency Warrants, Expiring
May 15, 1997.
4(qqq) --Form of Index Warrant Exhibit 4(lll) to Amendment No. 1 to
Agreement, including form of Registrant's Registration Statement on
Global Index Warrant Form S-3 (No. 33-54218).
Certificate.
4(rrr) --Form of Index Warrant Trust Exhibit 4(mmm) to Amendment No. 1 to
Indenture, including form of Registrant's Registration Statement on
Global Index Warrant Form S-3 (No. 33-54218).
Certificate.
4(sss) --Form of Index Warrant Exhibit 4 to Registrant's Current
Agreement, including form of Report on Form 8-K dated February 3,
Global Index Warrant 1994.
Certificate, relating to
Constant Maturity U.S.
Treasury Yield Increase
Warrants, Expiring August
25, 1995.
4(ttt) --Form of Index Warrant Exhibit 4 to Registrant's Current
Agreement, including form of Report on Form 8-K dated November 3,
Global Index Warrant 1994.
Certificate, relating to
Constant Maturity U.S.
Treasury Yield Increase
Warrants, Expiring January
25, 1996.
4(uuu) --Form of Index Warrant Exhibit 4 to Registrant's Current
Agreement, including form of Report on Form 8-K dated December 27,
Global Index Warrant 1993.
Certificate, relating to
AMEX Hong Kong 30 Index Call
Warrants with Optional
Reset, Expiring December 15,
1995.
4(vvv) --Form of Index Warrant Exhibit 4 to Registrant's Current
Agreement, including form of Report on Form 8-K dated February 8,
Global Warrant Certificate, 1995.
relating to Nikkei Stock
Index 300 Call Warrants,
Expiring February 3, 1997.
5 --Opinion of Brown & Wood. *
12 --Computation of Ratio of *
Earnings to Fixed Charges.
15 --Letter of Deloitte & Touche
LLP regarding unaudited
interim financial
information.
23(a) --Consent of Brown & Wood. *
23(b) --Consent of Deloitte & *
Touche LLP.
24 --Power of Attorney. *
25(a) --Form T-1 Statement of *
Eligibility and
Qualification under the
Trust Indenture Act of 1939
of Chemical Bank.
25(b) --Form T-1 Statement of *
Eligibility and
Qualification under the
Trust Indenture Act of 1939
of The Chase Manhattan Bank,
N.A.
99(a) --Opinion of Deloitte & *
Touche LLP with respect to
certain financial data
appearing in the
Registration Statement.
99(b) --Opinion of Deloitte & Exhibit 28 to Registrant's Annual
Touche LLP with respect to Report on Form 10-K for the year ended
certain summary financial December 30, 1994 (File No. 1-7182).
information and selected
financial data incorporated
by reference in the
Registration Statement.
</TABLE>
- --------
* Previously filed.
<PAGE>
EXHIBIT 15
August 21, 1995
Merrill Lynch & Co., Inc.
World Financial Center
North Tower, 31st Floor
New York, NY 10281
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim
consolidated financial information of Merrill Lynch & Co., Inc. and
subsidiaries as of June 30, 1995 and for the three- and six-month periods ended
June 30, 1995 and July 1, 1994 as indicated in our report dated August 11,
1995; because we did not perform an audit, we expressed no opinion on that
information.
We are aware that such report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended June 30, 1995, is
incorporated by reference in this Registration Statement.
We are also aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
New York, New York
