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RULE 424(b)5
REGISTRATION NO. 33-52647
PRELIMINARY AND SUBJECT TO COMPLETION
ISSUE DATE: APRIL 5, 1995
PROSPECTUS SUPPLEMENT
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(TO PROSPECTUS DATED APRIL 5, 1995)
LOGO
$10,000,000
MERRILL LYNCH & CO., INC.
GOLD LINKED NOTES DUE OCTOBER 30, 1996
---------------
An aggregate principal amount of $10,000,000 of Gold Linked Notes (the
"Notes") of Merrill Lynch & Co., Inc. (the "Company") are being offered
hereby. Each $25 principal amount of Notes 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 Notes are being offered at original issue prices specified below, will
bear no periodic payments of interest and will mature on October 30, 1996. At
maturity, a beneficial owner of a Note will be entitled to receive, with
respect to each Note, the principal amount thereof plus an interest payment
(the "Supplemental Redemption Amount") based upon the decrease, if any, or
lack of increase of the Spot Gold Price (as defined herein). The Notes are to
be issued as a series of Senior Debt Securities under the Chemical Indenture
described herein. The Notes are not redeemable prior to maturity.
The Supplemental Redemption Amount payable with respect to a Note at
maturity will equal the product of (i) the principal amount of the applicable
Note and (ii) 15.7625% - ([Spot Gold Price - $400] / 280.6035). For an
illustration of various amounts payable at maturity based on hypothetical Spot
Gold Prices, see the table on page S-9 in this Prospectus Supplement. In no
event, however, will the Supplemental Redemption Amount be less than $.38 per
$25 principal amount of the Notes (the "Minimum Supplemental Redemption
Amount"), or greater than $3.94 per $25 principal amount of the Notes (the
"Maximum Supplemental Redemption Amount"). The Minimum Supplemental Redemption
Amount is equivalent to a rate of return of 1% per annum and the Maximum
Supplemental Redemption Amount is equivalent to a rate of return of 10% per
annum, each calculated on a semi-annual bond equivalent basis. The calculation
of the Spot Gold Price, as more fully described herein, will equal the
arithmetic average (mean) of the afternoon fixing price in U.S. dollars per
troy ounce of .995 fine gold in London on certain days prior to maturity. THE
SUPPLEMENTAL REDEMPTION AMOUNT WILL EQUAL THE MAXIMUM SUPPLEMENTAL REDEMPTION
AMOUNT IF THE SPOT GOLD PRICE IS EQUAL TO $400 OR LESS AND WILL DECREASE IF
THE SPOT GOLD PRICE IS GREATER THAN $400. THE SUPPLEMENTAL REDEMPTION AMOUNT
WILL EQUAL THE MINIMUM SUPPLEMENTAL REDEMPTION AMOUNT IF THE SPOT GOLD PRICE
IS EQUAL TO $440 OR MORE. The London P.M. Fixing Price (as defined herein) was
$392.05 on April 5, 1995.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. 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 the offering of the Securities made hereby nor has the
Commissioner passed upon the accuracy or adequacy of this Prospectus Supplement
or Prospectus.
S-2
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SUMMARY
The following summary does not purport to be complete and is qualified in its
entirety by the more detailed information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus.
ISSUER...................... Merrill Lynch & Co., Inc.
NOTES OFFERED............... $10,000,000 Gold Linked Notes due October 30,
1996. The Notes are to be issued as a series of
Senior Debt Securities under the Chemical
Indenture described herein.
DENOMINATIONS............... Units consisting of $25 principal amount of Notes
and integral multiples thereof.
ORIGINAL ISSUE PRICE........ 100% for purchases of Notes in any single
transaction of less than $1,000,000 aggregate
principal amount of Notes, and % for purchases
of Notes in any single transaction of $1,000,000
aggregate principal amount of Notes or more.
MATURITY.................... October 30, 1996.
PAYMENT AT MATURITY......... At maturity, a beneficial owner of a Note will be
entitled to receive, with respect to each Note,
the principal amount thereof plus the
Supplemental Redemption Amount. The
"Supplemental Redemption Amount" will be
determined by Merrill Lynch Capital Services,
Inc., an affiliate of the Company, or successor
thereto (the "Calculation Agent"), and will
equal with respect to a Note at maturity the
product of (i) the principal amount of the
applicable Note and (ii) 15.7625% - ([Spot Gold
Price - $400] / 280.6035). IN NO EVENT, HOWEVER,
WILL THE SUPPLEMENTAL REDEMPTION AMOUNT BE LESS
THAN $.38 PER $25 PRINCIPAL AMOUNT OF THE NOTES
(THE "MINIMUM SUPPLEMENTAL REDEMPTION AMOUNT"),
OR GREATER THAN $3.94 PER $25 PRINCIPAL AMOUNT
OF THE NOTES (THE "MAXIMUM SUPPLEMENTAL
REDEMPTION AMOUNT"). The Minimum Supplemental
Redemption Amount is equivalent to a rate of
return of 1% per annum and the Maximum
Supplemental Redemption Amount is equivalent to
a rate of return of 10% per annum, each
calculated on a semi-annual bond equivalent
basis.
SPOT GOLD PRICE............. The Spot Gold Price will be determined by the
Calculation Agent and will equal the arithmetic
average (mean) of the Gold Prices on the
Calculation Days. "Gold Price" with respect to a
Calculation Day will equal the London afternoon
price for such Calculation Day, expressed in
U.S. dollars, in the London over-the-counter
gold bullion market for one troy ounce of .995
fine gold as further described herein.
"Calculation Day" means each of the Trading Days
during the Calculation Period on which a Market
Disruption Event has not occurred, as determined
by the Calculation Agent. The "Calculation
Period" means the period from and including
October 21, 1996 to and including October 25,
1996. If no Calculation Days occur during the
Calculation Period due to Market Disruption
Events, the first Trading Day prior to October
21, 1996 on which a Market
S-3
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Disruption Event has not occurred will be deemed
a Calculation Day, and the Spot Gold Price will
equal the Gold Price on such Trading Day.
"Trading Day" means a day on which over-the-
counter trading generally occurs in gold bullion
in London, as determined by the Calculation
Agent.
SPECIAL CONSIDERATIONS...... The Notes are subject to certain special
considerations. INVESTORS SHOULD BE AWARE THAT
IF THE SPOT GOLD PRICE IS EQUAL TO OR GREATER
THAN $440.00, THE BENEFICIAL OWNERS OF THE NOTES
WILL BE ENTITLED TO RECEIVE THE PRINCIPAL AMOUNT
OF THE NOTES AND MINIMUM SUPPLEMENTAL REDEMPTION
AMOUNT ONLY. This will be true even though the
price of gold as of some interim period or
periods prior to the Calculation Period may have
been less than $440.00 per troy ounce. IF THE
SPOT GOLD PRICE IS EQUAL TO OR LESS THAN $400,
THE BENEFICIAL OWNERS OF THE NOTES WILL BE
ENTITLED TO RECEIVE ONLY THE PRINCIPAL AMOUNT OF
THE NOTES AND THE MAXIMUM SUPPLEMENTAL
REDEMPTION AMOUNT.
A beneficial owner of the Notes 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 Notes. The return of principal of the Notes
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.
There can be no assurance as to how the Notes
will trade in the secondary market or whether
such market will be liquid. The price at which a
beneficial owner will be able to sell Notes
prior to maturity may be at a discount, which
could be substantial, from the principal amount
thereof, if, at such time, the price of gold
expected during the Calculation Period is above,
equal to or not sufficiently below $440.00. The
trading values of the Notes may also be affected
by the creditworthiness of the Company and by a
number of interrelated factors, including
changes in interest rates, the volatility of the
price of gold and the time remaining to
maturity. Market gold prices and gold prices in
the forward market can fluctuate widely and are
affected by numerous factors.
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. The
Notes are not suitable for investors seeking a
stable return of current income. See "Special
Considerations" in this Prospectus Supplement.
Investors should also consider the tax
consequences of investing in the Notes. See
"Certain United States Federal Income Tax
Considerations" in this Prospectus Supplement.
S-4
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SPECIAL CONSIDERATIONS
PAYMENT AT MATURITY
IF THE SPOT GOLD PRICE IS EQUAL TO OR GREATER THAN $440.00, THE BENEFICIAL
OWNERS OF THE NOTES WILL BE ENTITLED TO RECEIVE ONLY THE PRINCIPAL AMOUNT OF
THE NOTES AND THE MINIMUM SUPPLEMENTAL REDEMPTION AMOUNT. This will be true
even though the price of gold as of some interim period or periods prior to the
Calculation Period may have been less than $440.00 per troy ounce. IF THE SPOT
GOLD PRICE IS EQUAL TO OR LESS THAN $400.00, THE BENEFICIAL OWNERS OF THE NOTES
WILL BE ENTITLED TO RECEIVE ONLY THE PRINCIPAL AMOUNT OF THE NOTES AND THE
MAXIMUM SUPPLEMENTAL REDEMPTION AMOUNT. The 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 Notes. The return of principal of the Notes 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.
As the value of the Spot Gold Price increases from $400 to $440, the
Supplemental Redemption Amount decreases and does so at a greater rate than the
given rate of change in the value of the Spot Gold Price. The Spot Gold Price
will be determined prior to the maturity of the Notes as described below.
The Notes do not entitle the beneficial owners thereof to exchange the Notes
for gold or entitle the beneficial owners thereof to sell gold to, or buy gold
from, the Company. The Notes will be unsecured and will 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 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 ("MLPF&S"), to the Company are
restricted by net capital requirements under the United States Securities
Exchange Act of 1934 and under rules of certain exchanges and other regulatory
bodies.
TRADING
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 will be affected by the creditworthiness of the Company
and by a number of other factors.
The trading values of the Notes 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 amount of the Notes to be
repaid at maturity. Accordingly, investors should be aware that factors other
than the price of gold are likely to affect their trading value. The expected
effect on the trading value of the Notes of each of the factors listed below,
assuming in each case that all other factors are held constant, is as follows:
Expected Future Price of Gold. The trading value of the Notes is expected
to depend primarily on the price of gold expected on the days used to
calculate the Supplemental Redemption Amount. Because the Spot Gold Price
is determined using the price of gold for immediate delivery (i.e., the
spot price) on certain days prior to the maturity of the Notes, the spot
price on other days during the term of the Notes may not affect the trading
value of the Notes. If Notes 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 price for gold underlying such sale were to prevail
until maturity of the Notes because of the possible fluctuation of the
price of gold between the time of such sale and the Calculation Period. See
"Historical Gold Prices" in this Prospectus Supplement. Furthermore, the
price at which a beneficial owner will be able to sell Notes prior to
maturity may be at a discount, which could be substantial, from the
principal amount thereof, if, at such time, the price of gold expected on
the days used to calculate the Supplemental Redemption Amount is above,
equal to or not sufficiently below $440.00.
S-5
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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 expected to increase. Interest rates may also affect
the U.S. economy, and, in turn, the price of gold.
Volatility of the Price of Gold. If the volatility of the price of gold
increases, the trading value of the Notes is expected to decrease. If the
volatility of the price of gold decreases, the trading value of the Notes
is expected to increase.
Time Remaining to Maturity. The Notes may trade at a value below that
which may be inferred from the level of interest rates and the price of
gold. This difference will reflect a "time premium" due to expectations
concerning the value of the price of gold during the period prior to
maturity of the Notes. As the time remaining to maturity of the Notes
decreases, however, this time premium is expected to decrease, thus
increasing the trading value of the Notes.
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, or are accompanied by, changes in others.
MARKET FOR GOLD
Market gold prices and gold prices in the forward market can fluctuate widely
and are affected by numerous factors, including industrial and jewelry demand,
expectations with respect to the rate of inflation, the strength of the United
States dollar (the currency in which the price of gold is generally quoted) and
other currencies, interest rates, central bank sales, forward sales by
producers, global or regional political or economic events, production costs
and disruptions in major gold producing regions such as South Africa and the
Commonwealth of Independent States. The demand for and supply of gold affect
gold prices, but not necessarily in the same manner as supply and demand affect
the prices of other commodities. The supply of gold consists of a combination
of new mine production and existing stocks of bullion and fabricated gold held
by governments, public and private financial institutions, industrial
organizations and private individuals. As the amounts produced in any single
year constitute a very small portion of the total potential supply of gold,
normal variations in production do not necessarily have a significant impact on
the supply of gold or on its price. In addition, the price of gold has on
occasion been subject to very rapid changes due to speculative activities.
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. The
Notes are not suitable for investors seeking a stable return of current income.
Investors should also consider the tax consequences of investing in the
Notes. See "Certain United States Federal Income Tax Considerations" in this
Prospectus Supplement.
S-6
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DESCRIPTION OF NOTES
GENERAL
The Notes are to be issued as a series of Senior Debt Securities under the
Chemical Indenture, dated as of April 1, 1983, as amended and restated, which
is more fully described in the accompanying Prospectus.
No periodic payments of interest will be payable with respect to the Notes.
See "Payment at Maturity" below.
The Notes 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 Notes, Holders of the Notes may accelerate the maturity of the
Notes, as described under "Description of Notes--Events of Default and
Acceleration" in this Prospectus Supplement and "Description of Debt
Securities--General--Events of Default" in the accompanying Prospectus.
The Notes are to be issued in denominations of $25 and integral multiples in
excess thereof.
PAYMENT AT MATURITY
At maturity, a beneficial owner of a Note will be entitled to receive the
principal amount thereof plus a Supplemental Redemption Amount, all as provided
below. If the Spot Gold Price is equal to or greater than $440, a beneficial
owner of a Note will be entitled to receive only the principal amount thereof
and the Minimum Supplemental Redemption Amount; if the Spot Gold Price is equal
to or less than $400, a beneficial owner of a Note will be entitled to receive
only the principal amount thereof and the Maximum Supplemental Redemption
Amount.
At maturity, a beneficial owner of a Note will be entitled to receive, with
respect to each such Note, (i) the principal amount thereof, and (ii) the
Supplemental Redemption Amount equal in amount to:
Principal Amount X (15.7625% - [(Spot Gold Price - $400) / 280.6035])
provided, that the Supplemental Redemption Amount will not be less than the
Minimum Supplemental Redemption Amount of $.38 per $25 principal amount of
Notes or greater than the Maximum Supplemental Redemption Amount of $3.94 per
$25 principal amount of Notes. The Minimum Supplemental Redemption Amount is
equivalent to a rate of return of 1% per annum and the Maximum Supplemental
Redemption Amount is equivalent to a rate of return of 10% per annum, each
calculated on a semi-annual bond equivalent basis. The 15.7625% figure included
in the above formula represents the annualized rate of return that results from
payment of the Maximum Supplemental Redemption Amount (i.e., 10% per annum on a
semi-annual bond equivalent basis) applied over the expected term of the Notes
(1.5 years).
The "Spot Gold Price" will be determined by Merrill Lynch Capital Services,
Inc., an affiliate of the Company, or successor thereto (the "Calculation
Agent"), and will equal the arithmetic average (mean) of the Gold Prices on
each of the Trading Days during the Calculation Period on which a Market
Disruption Event has not occurred, as determined by the Calculation Agent
(each, a "Calculation Day"). The "Calculation Period" means the period from and
including October 21, 1996 to and including October 25, 1996. If no Calculation
Days occur during the Calculation Period due to Market Disruption Events, the
first Trading Day prior to October 21, 1996 on which a Market Disruption Event
has not occurred will be deemed a Calculation Day, and the Spot Gold Price will
equal the Gold Price on such Trading Day. "Trading Day" means a day on which
over-the-counter trading generally occurs in gold bullion in London, as
determined by the Calculation Agent.
"Gold Price" with respect to a Calculation Day will be determined by the
Calculation Agent, and will equal the London afternoon price for such
Calculation Day, expressed in U.S. dollars, in the London over-the-
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counter gold bullion market for one troy ounce of .995 fine gold (the "London
P.M. Fixing Price") as specified on page GOFO displayed on the Reuter Monitor
Money Rates Service (or such other page as may replace that page on that
service for the purpose of displaying such price). If the London P.M. Fixing
Price is not so displayed by 4:30 p.m. (London time) on such Calculation Day,
then the Gold Price for such Calculation Day will mean the London P.M. Fixing
Price specified on page RNBL displayed on the Reuter Monitor Money Rates
Service (or such other page as may replace that page on that service for the
purpose of displaying such price). If the London P.M. Fixing Price is not
displayed on either such page by 4:45 p.m. (London time) on such Calculation
Day, the Gold Price for such Calculation Day will mean an amount determined by
the Calculation Agent as the arithmetic average (mean) of offer prices
(expressed in U.S. dollars) per one troy ounce of .995 fine gold in an amount
as is customary in such market at such time at or about 4:45 p.m. (London time)
on such Calculation Day quoted to it by five institutions involved in the
buying and selling of gold (disregarding the highest and the lowest of such
offer prices), or otherwise as determined by the Calculation Agent using such
other method as the Calculation Agent may consider to have become customary or
otherwise to be appropriate for determining the price of gold in London, or
failing which, in The City of New York.
If at any time the method of reporting the London P.M. Fixing Price is
changed or modified in a material respect, such that such reporting does not,
in the opinion of the Calculation Agent, fairly represent the London P.M.
Fixing Price had such changes or modifications not been made, the Calculation
Agent shall, 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 comparable to the London P.M. Fixing Price as if such
changes or modifications had not been made, and calculate the Gold Price for
such Calculation Day with reference to the London P.M. Fixing Price as so
adjusted. Accordingly, if the method of reporting the London P.M. Fixing Price
is modified so that the value reported is a fraction or a multiple of what it
would have been if it had not been modified (e.g., the price reported is for
one-half troy ounce), the Calculation Agent shall adjust such reported value in
order to arrive at a value of the London P.M. Fixing Price as if it had not
been modified.
"Market Disruption Event" means a determination by the Calculation Agent that
either of the following has occurred:
(i)a suspension or material limitation of trading in the London gold
bullion over-the-counter market; or
(ii)the occurrence or existence in the half hour period that ends
immediately prior to the determination of the London P.M. Fixing Price of
any suspension or limitation imposed on trading on any exchange on which
futures or options on gold are traded in such contracts and, in the
determination of the Calculation Agent, such suspension or limitation is
material.
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, and (ii) a suspension in
trading in a futures or options contract on gold by an exchange by reason of
(a) a price change violating limits set by such exchange, (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.
All determinations made by the Calculation Agent shall be at the sole
discretion of the Calculation Agent and, in the absence of a determination 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).
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The following table illustrates, for a range of hypothetical Spot Gold
Prices, the Supplemental Redemption Amount which would be payable at maturity
for each $25 principal amount of Notes and the pretax annualized rate of return
to beneficial owners of the Notes.
<TABLE>
<CAPTION>
SUPPLEMENTAL REDEMPTION AMOUNT PRETAX ANNUALIZED
HYPOTHETICAL PER $25 PRINCIPAL RATE OF RETURN
SPOT GOLD PRICE AMOUNT OF NOTES AT MATURITY(/1/)
--------------- ------------------------------ -----------------
<S> <C> <C>
$400 (or below) $3.94 10.00%
405 3.50 8.92%
410 3.05 7.82%
415 2.60 6.72%
420 2.16 5.60%
425 1.71 4.47%
430 1.27 3.33%
435 .82 2.17%
440 (or above) .38 1.00%
</TABLE>
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(1) The annualized rates of return indicated in the preceding table are
calculated on a semiannual bond equivalent basis. All returns assume an
issue date of April 30, 1995 and a maturity of October 30, 1996.
The above figures are for purposes of illustration only. The Supplemental
Redemption Amount received by investors will depend entirely on the actual Spot
Gold Price determined by the Calculation Agent as provided herein. Historical
data regarding the price of gold is included in this Prospectus Supplement
under "Historical Gold Prices".
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 be an amount calculated as though the date of
early repayment were the maturity date of the Notes. See "Description of
Notes--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
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 6.85% per annum on the basis of a 360 day year of twelve 30-day
months (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.
SECURITIES DEPOSITORY
Upon issuance, all Notes 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,
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 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.
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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 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 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 Notes represented by such
Global Note for all purposes under the Chemical Indenture. Except as provided
below, Beneficial Owners in a Global Note will not be entitled to have the
Notes represented by such Global Notes 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
Chemical 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 Chemical 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 Chemical
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 amount in addition thereto 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 Notes representing such Notes. None of the Company,
the Senior Debt Trustee or any other agent of the Company or agent of the
Senior Debt Trustee will have any responsibility or liability for any aspect of
the records relating to or payments made on account of beneficial
S-10
<PAGE>
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 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 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
Senior Debt 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 Notes will be exchangeable for Notes in
definitive form of like tenor and of an equal aggregate principal amount, in
denominations of whole Units. Such definitive Notes shall be registered in such
name or names as the Securities Depository shall instruct the Senior Debt
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.
HISTORICAL GOLD PRICES
The market for gold is global and gold prices fluctuate widely and are
affected by numerous factors, including political and economic conditions,
expectations for inflation, the perceived worth of gold as a store of economic
value to investors, global and regional demand, and production costs in major
gold producing regions. It is not possible to predict the aggregate effect of
these factors. See "Special Considerations" in this Prospectus Supplement.
The following table sets forth the historical values of the London P.M.
Fixing Price on the last Trading Day of each month from January 1990 through
March 1995. PAST MOVEMENTS OF THE LONDON P.M. FIXING PRICE ARE NOT NECESSARILY
INDICATIVE OF THE FUTURE LONDON P.M. FIXING PRICE. The historical experience of
the London P.M. Fixing Price should not be taken as an indication of future
performance and no assurance can be given that the London P.M. Fixing Price
will not increase and thereby cause the Supplemental Redemption Amount with
respect to the Notes to equal only the Minimum Supplemental Redemption Amount.
The London P.M. Fixing Price was $392.05 on April 5, 1995.
<TABLE>
<CAPTION>
LONDON P.M.
FIXING
PRICE
-----------
<S> <C>
1990
January..................................................... $415.05
February.................................................... 407.70
March....................................................... 368.50
April....................................................... 367.75
May......................................................... 363.05
June........................................................ 352.20
July........................................................ 372.30
August...................................................... 387.75
September................................................... 403.95
October..................................................... 379.50
November.................................................... 384.85
December.................................................... 392.75
</TABLE>
S-11
<PAGE>
<TABLE>
<CAPTION>
LONDON P.M.
FIXING
PRICE
-----------
<S> <C>
1991
January.................................................... 366.00
February................................................... 362.70
March...................................................... 355.65
April...................................................... 357.75
May........................................................ 360.40
June....................................................... 368.35
July....................................................... 362.85
August..................................................... 347.40
September.................................................. 354.90
October.................................................... 357.45
November................................................... 366.30
December................................................... 353.20
1992
January.................................................... 354.10
February................................................... 353.10
March...................................................... 341.80
April...................................................... 336.35
May........................................................ 337.50
June....................................................... 343.40
July....................................................... 357.85
August..................................................... 341.00
September.................................................. 349.00
October.................................................... 339.25
November................................................... 334.20
December................................................... 332.90
1993
January.................................................... 330.45
February................................................... 327.60
March...................................................... 337.80
April...................................................... 354.30
May........................................................ 377.45
June....................................................... 378.45
July....................................................... 401.75
August..................................................... 371.55
September.................................................. 355.50
October.................................................... 369.60
November................................................... 370.90
December................................................... 391.75
1994
January.................................................... 377.90
February................................................... 381.55
March...................................................... 389.20
April...................................................... 376.45
May........................................................ 387.60
June....................................................... 388.25
July....................................................... 384.00
August..................................................... 385.75
September.................................................. 394.85
October.................................................... 383.85
</TABLE>
S-12
<PAGE>
<TABLE>
<CAPTION>
LONDON P.M.
FIXING
PRICE
-----------
<S> <C>
November................................................... 383.10
December................................................... 383.25
1995
January.................................................... 374.90
February................................................... 376.40
March...................................................... 392.30
</TABLE>
- --------
Source: World Gold Council
The following graph sets forth the historical values of the London P.M.
Fixing Price on the last Trading Day of each month from January 1990 through
March 1995. PAST MOVEMENTS OF THE LONDON P.M. FIXING PRICE ARE NOT NECESSARILY
INDICATIVE OF THE FUTURE LONDON P.M. FIXING PRICE. The historical experience of
the London P.M. Fixing Price should not be taken as an indication of future
performance and no assurance can be given that the London P.M. Fixing Price
will not increase and thereby cause the Supplemental Redemption Amount with
respect to the Notes to equal only the Minimum Supplemental Redemption Amount.
The London P.M. Fixing Price was $392.05 on April 5, 1995.
[The graph sets forth the historical values of the London P.M. Fixing Price on
the last Trading Day of each month from January 1990 through March 1995, with
the vertical axis specifying the London P.M. Fixing Price in a range from 300 to
450 in increments of 25 and the horizontal axis specifying the time period, in
increments of four months from January 1990 to January 1995, and in a two month
increment from January 1995 to March 1995.]
S-13
<PAGE>
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 discussion below deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes. It also does not deal
with 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 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 Company currently intends to treat each Note as a debt
instrument of the Company for United States Federal income tax purposes and,
where required, intends to file information returns with the Internal Revenue
Service ("IRS") in accordance with such treatment, in the absence of any change
or clarification in the law, by regulation or otherwise, requiring a different
characterization. The following discussion of the principal United States
Federal income tax consequences of the purchase, ownership and disposition of
the Notes is based upon the assumption that each Note will be treated as a debt
instrument of the Company for the United States Federal income tax purposes.
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, 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).
S-14
<PAGE>
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
IRS could assert that any amounts realized upon the sale or exchange of a Note
prior to maturity in excess of the Note's adjusted issue price as of the date
of disposition (i.e., the Note's stated principal amount increased by any
previously accrued original issue discount with respect to the Note)
constitutes ordinary interest income (subject to the bond premium rules, as
discussed below). Nonetheless, although the matter is not free from doubt,
under current law, any gain realized upon the sale or exchange of a Note prior
to maturity should be treated entirely as capital gain (subject to the market
discount rules, as discussed below).
Prospective investors in the Notes should also be aware that on December 16,
1994, the Treasury Department issued proposed regulations (the "Proposed
Regulations") concerning the proper United States Federal income tax treatment
of contingent payment debt instruments such as the Notes. The Proposed
Regulations, however, are proposed to apply only to debt instruments issued 60
days or more after the date on which the Proposed Regulations are published as
final Treasury regulations. Accordingly, if ultimately adopted in their current
form, the Proposed Regulations would not apply to the Notes. Furthermore,
proposed Treasury regulations are not binding upon either the IRS or taxpayers
prior to becoming effective as temporary or final regulations. In general, if
ultimately adopted in their current form, the Proposed Regulations would cause
the timing and character of income, gain or loss reported on a contingent
payment debt instrument to substantially differ from the timing and character
of income, gain or loss reported on a contingent payment debt instrument under
general principles of current United States Federal income tax law (as
described above). Prospective investors in the Notes are urged to consult their
own tax advisers concerning the effect, if any, of the Proposed Regulations on
their investment in the Notes.
Based upon the current state of the law, the Company, where required,
currently intends to file information returns with the IRS treating each Note
as a debt instrument of the Company for United States Federal income tax
purposes (as discussed above) and reporting noncontingent interest and
contingent interest, if any, on and gross proceeds received upon the sale,
exchange or retirement of each Note in accordance with general principles of
current United States Federal income tax law (as described above), in the
absence of any change or clarification in the law, by regulation or otherwise.
MARKET DISCOUNT AND PREMIUM
If a U.S. Holder purchases a Note for an amount that is less than the issue
price thereof (i.e., the Note's stated principal amount), or, in the case of a
subsequent purchaser, 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
S-15
<PAGE>
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 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 greater
shareholder of the Company, a controlled foreign corporation described in
section 957(a) of the Internal Revenue Code of 1986, as amended (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.
S-16
<PAGE>
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.
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be used as described under
"Use of Proceeds" in the attached Prospectus and to hedge market risks
affecting the value of the amount payable by the Company at maturity pursuant
to the terms of the Notes.
UNDERWRITING
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Underwriter") has
agreed, subject to the terms and conditions of the Underwriting Agreement and a
Terms Agreement, to purchase from the Company $10,000,000 aggregate principal
amount of Notes. The Underwriting Agreement provides that the obligations of
the Underwriter are subject to certain conditions precedent and that the
Underwriter will be obligated to purchase all of the Notes if any are
purchased.
The Underwriter has advised the Company that it proposes initially to offer
the Notes directly to the public at the offering prices set forth on the cover
page of this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of % of the principal amount of the Notes. The
Underwriter may allow, and such dealers may reallow, a discount not in excess
of % of the principal amount of the Notes to certain other dealers. After the
initial public offering, the public offering prices, concession and discount
may be changed.
The underwriting 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.
VALIDITY OF SECURITIES
The validity of the Notes will be passed upon for the Company and for the
Underwriter by Brown & Wood, New York, New York.
S-17
<PAGE>
PROSPECTUS
LOGO
MERRILL LYNCH & CO., INC.
DEBT SECURITIES AND WARRANTS
Merrill Lynch & Co., Inc. (the "Company") intends to sell from time to time
up to $3,372,953,046 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.
----------------
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; The 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.
----------------
The date of this Prospectus is April 5, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). 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: Chicago Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and New York 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
and Current Reports on Form 8-K dated January 12, 1995, January 23, 1995, March
3, 1995 and March 9, 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 Sections 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, Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("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 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 and other information and data contained in the Company's Annual
Report on Form 10-K for the year ended December 30, 1994. See "Incorporation
of Certain Documents by Reference." 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.
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN DECEMBER
----------------------------------------------------------------
1990 1991 1992 1993 1994
----------- ----------- ------------ ------------ ------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
Revenues................ $11,147,229 $12,352,812 $ 13,412,668 $ 16,588,177 $ 18,233,091
Net revenues............ $ 5,783,329 $ 7,246,468 $ 8,577,401 $ 10,558,230 $ 9,624,521
Earnings before income
taxes and cumulative
effect of changes in
accounting
principles(1).......... $ 282,328 $ 1,017,418 $ 1,621,389 $ 2,424,808 $ 1,729,604
Cumulative effect of
changes in accounting
principles (net of
applicable income
taxes)(1).............. -- -- $ (58,580) $ (35,420) --
Net earnings(1)......... $ 191,856 $ 696,117 $ 893,825 $ 1,358,939 $ 1,016,761
Ratio of earnings to
fixed charges(2)....... 1.1 1.2 1.3 1.4 1.2
Total assets(3)......... $68,129,527 $86,259,343 $107,024,173 $152,910,362 $163,749,327
Long-term borrowings(4). $ 6,341,559 $ 7,964,424 $ 10,871,100 $ 13,468,900 $ 14,863,383
Stockholders' equity.... $ 3,225,430 $ 3,818,088 $ 4,569,104 $ 5,485,913 $ 5,817,545
</TABLE>
- --------
(1) 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."
(2) 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 and
that portion of rentals estimated to be representative of the interest
factor.
(3) During 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.
(4) 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 December 30, 1994,
$557,776,000 of bank loans and $14,758,830,000 of commercial paper were
outstanding. In addition, certain of the Company's subsidiaries lend
securities and enter into repurchase agreements to obtain financing. At
December 30, 1994, cash deposits for securities loaned and securities sold
under agreements to repurchase amounted to $2,180,186,000 and
$51,864,594,000, respectively. From December 31, 1994 to March 31, 1995,
long-term borrowings, net of new issuances and resales, decreased in the
amount of approximately $628,194,000.
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 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.
6
<PAGE>
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 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.
7
<PAGE>
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.
8
<PAGE>
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"), dated as of August 1, 1991, between the Company and Chemical Bank
(successor by merger to Manufacturers Hanover Trust Company), 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
9
<PAGE>
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. 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 interest, premium and Additional Amounts, if any, 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 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.
10
<PAGE>
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 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, 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, 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, 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 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. Before
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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 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 Indentures 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
December 30, 1994, a total of approximately $30.5 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 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 global
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 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 connection with the exercise of such
Index Warrants if the Index changes or ceases to be made available by
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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 national securities exchange on which such Index Warrants
will be listed, 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 and under "Description of
Index Warrants" 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 listed on a national securities exchange as specified in the Prospectus
Supplement. It is expected that such exchange 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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EVENT 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
19
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be made include 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 such 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.
20
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND
THEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary.................................................................... S-3
Special Considerations..................................................... S-5
Description of Notes....................................................... S-7
Historical Gold Prices..................................................... S-11
Certain United States Federal Income Tax Considerations.................... S-14
Use of Proceeds............................................................ S-17
Underwriting............................................................... S-17
Validity of Securities..................................................... S-17
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Merrill Lynch & Co., Inc................................................... 3
Use of Proceeds............................................................ 3
Summary Financial Information.............................................. 4
Description of Debt Securities............................................. 9
Description of Debt Warrants............................................... 13
Description of Currency Warrants........................................... 14
Description of Index Warrants.............................................. 15
Plan of Distribution....................................................... 19
Experts.................................................................... 20
</TABLE>
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LOGO
$10,000,000
MERRILL LYNCH & CO., INC.
GOLD LINKED NOTES
DUE OCTOBER 30, 1996
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PROSPECTUS SUPPLEMENT
----------------------
MERRILL LYNCH & CO.
APRIL , 1995
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