MERRILL LYNCH & CO INC, 424B5, 1996-09-04

MERRILL LYNCH & CO INC
424B5, 1996-09-04
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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<PAGE>

RULE NO. 424(b)(5)
REGISTRATION NO. 33-65135

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT, DATED AUGUST 30, 1996

PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED AUGUST 30, 1996)

[LOGO]
2,500,000 UNITS
MERRILL LYNCH & CO., INC.
HEALTHCARE/BIOTECHNOLOGY PORTFOLIO MARKET INDEX TARGET-TERM
SECURITIES(Service Mark)
DUE OCTOBER , 2001
"MITTS(registered Service Mark)"

An aggregate principal amount of $25,000,000 of Healthcare/Biotechnology
Portfolio Market Index Target-Term Securities(Service Mark) due October , 2001
(the "Securities" or "MITTS(registered Service Mark)") of Merrill Lynch & Co.,
Inc. (the "Company") are being offered hereby. Each $10 principal amount of
Securities will be deemed a "Unit" for purposes of trading and transfer. Units
will be transferable by the Depository (as hereinafter defined), as more fully
described below.

The Securities are debt securities of the Company, which are being issued in
denominations of $10 and integral multiples thereof, will bear no periodic
payments of interest and will mature on October , 2001. At maturity, a
beneficial owner of a Security will be entitled to receive, with respect to
each Security, the principal amount thereof plus an interest payment (the
"Supplemental Redemption Amount") based on the percentage increase, if any, in
the value of a portfolio (the "Portfolio") of specified stocks of companies
involved in various segments of the healthcare industry and the biotechnology
industry over the Benchmark Portfolio Value. The Supplemental Redemption
Amount will in no event be less than zero. The Securities are not redeemable
or callable by the Company prior to maturity. While at maturity a beneficial
owner of a Security will receive the principal amount of such Security plus
the Supplemental Redemption Amount, if any, there will be no other payment of
interest, periodic or otherwise.

The Supplemental Redemption Amount payable with respect to a Security at
maturity will equal the product of (A) the principal amount of the applicable
Security, and (B) the percentage increase from the Benchmark Portfolio Value
to the Ending Portfolio Value. The Benchmark Portfolio Value will exceed the
Starting Portfolio Value on the date the Securities are priced by the Company
for initial sale to the public (the "Pricing Date") by 12% to 18% (the actual
percentage will be determined on the Pricing Date). The Starting Portfolio
Value, as more particularly described herein, will be the closing value of the
Portfolio on the Pricing Date and will be calculated so that each Portfolio
Security represents an equal percentage of the Starting Portfolio Value. The
Benchmark Portfolio Value will be set forth in the final form of this
Prospectus Supplement delivered to investors in connection with sales of the
Securities. The Ending Portfolio Value, as more particularly described herein,
will be the average (arithmetic mean) of the closing values of the Portfolio
on certain days, or, if certain events occur, the closing value of the
Portfolio on a single day prior to the maturity of the Securities.

FOR INFORMATION AS TO THE CALCULATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT,
IF ANY, WHICH WILL BE PAID AT MATURITY, THE CALCULATION AND THE COMPOSITION OF
THE PORTFOLIO, AND CERTAIN TAX CONSEQUENCES TO BENEFICIAL OWNERS OF THE
SECURITIES, SEE "DESCRIPTION OF SECURITIES", "THE PORTFOLIO", AND "CERTAIN
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS", RESPECTIVELY, IN THIS
PROSPECTUS SUPPLEMENT. FOR OTHER INFORMATION THAT SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" BEGINNING ON PAGE S-6 OF THIS
PROSPECTUS SUPPLEMENT.

Ownership of the Securities will be maintained in book-entry form by or
through the Depository. Beneficial owners of the Securities will not have the
right to receive physical certificates evidencing their ownership except under
the limited circumstances described herein.

Application will be made to list the Securities on the American Stock
Exchange under the symbol "MLH".

---------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(1) THE COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit............................... $10 $ $
- --------------------------------------------------------------------------------
Total.................................. $25,000,000 $ $
================================================================================
</TABLE>

(1) The "Price to Public" and "Underwriting Discount" for any single
transaction to purchase 100,000 to (but not including) 500,000 Units will
be $ per Unit and $ per Unit, respectively, and the "Price to
Public" and "Underwriting Discount" for any single transaction to purchase
500,000 Units or more will be $ per Unit and $ per Unit,
respectively.

(2) Before deduction of expenses payable by the Company.

---------------

The Securities are offered by the Underwriter, subject to prior sale, when,
as, and if issued by the Company and accepted by the Underwriter and subject
to certain other conditions. The Underwriter reserves the right to reject
orders in whole or in part. It is expected that delivery of the Securities
will be made in New York, New York on or about September , 1996.

This Prospectus Supplement and the accompanying Prospectus may be used by
the Underwriter in connection with offers and sales related to market-making
transactions in the Securities. The Underwriter may act as principal or agent
in such transactions. Such sales will be made at prices related to prevailing
market prices at the time of sale.

---------------

MERRILL LYNCH & CO.

---------------

The date of this Prospectus Supplement is September , 1996.

- -------
"MITTS" is a registered service mark and "Market Index Target-Term Securities"
is a service mark owned by Merrill Lynch & Co., Inc.
<PAGE>

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 ON THE AMERICAN STOCK EXCHANGE, 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
<PAGE>

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.

Securities Offered.......... 2,500,000 Units of Healthcare/Biotechnology
Portfolio Market Index Target-Term Securities
due October , 2001. The Securities are to
be issued as a series of Senior Debt
Securities under the 1983 Indenture described
herein.

Listing..................... Application will be made to list the
Securities on the American Stock Exchange
under the symbol "MLH".

Denominations............... A Unit consisting of $10 principal amount of
Securities and integral multiples thereof.

Maturity.................... October , 2001.

Payment at Maturity......... At maturity, a beneficial owner of a Security
will be entitled to receive (i) the principal
amount thereof and (ii) the Supplemental
Redemption Amount equal to:

Ending Portfolio Value - Benchmark
Principal Portfolio Value
Amount X ----------------------------------
Benchmark Portfolio Value

Starting Portfolio Value.... Based on the individual prices of the
Portfolio Securities on the Pricing Date, the
Multiplier (as defined below) for each
Portfolio Security will be initially set so
that, on the Pricing Date, the Portfolio
Securities are equally dollar-weighted in the
Portfolio and the Portfolio Value equals 100.

Portfolio Securities........ The stocks indicated under the caption
"Description of Securities--Portfolio
Securities" below will be used to calculate
the value of the Portfolio. Beneficial owners
of the Securities will not have any right to
receive Portfolio Securities. The Portfolio
Securities represent interests in equity
securities issued by 26 corporations involved
in various segments of the healthcare
industry and the biotechnology

S-3
<PAGE>

industry (the "Portfolio Securities"), and
have significantly different market
capitilizations (i.e., the number of shares
outstanding of a security multiplied by the
current price of such security). The original
Multipliers will be determined so that each
Portfolio Security represents an equal
percentage of the Starting Portfolio Value on
the Pricing Date. See "The Portfolio" in this
Prospectus Supplement. The inclusion of a
Portfolio Security in the Portfolio is not a
recommendation to buy or sell such Portfolio
Security, and neither the Company nor any of
its affiliates make any representation to any
purchaser of Securities as to the performance
of the Portfolio or any Portfolio Security.

Symbol for Portfolio Value.. "MXH"

Portfolio Value............. The American Stock Exchange, or any successor
thereto (the "AMEX"), generally will
calculate and disseminate the value of the
Portfolio based on the most recently reported
prices of the Portfolio Securities (as
reported by the primary exchange or trading
system on which such Portfolio Securities are
listed or traded (the "Exchanges")), at
approximately 15-second intervals during the
AMEX's business hours and at the end of each
Portfolio Business Day via the Consolidated
Tape Association's Network B. The Portfolio
Value, at any time, will equal the sum of the
products of such prices and the applicable
Multipliers for the Portfolio Securities. The
Ending Portfolio Value, however, will be
calculated by the Calculation Agent based on
averaging the Portfolio Values reported by
the AMEX at the end of certain Portfolio
Business Days (as defined below). See
"Description of Securities--Payment at
Maturity" in this Prospectus Supplement.

Risk Factors................ The Securities are subject to certain special
considerations. On the Pricing Date, the
Benchmark Portfolio Value will exceed the
Starting Portfolio Value by 12% to 18% (the
actual percentage will be determined on the
Pricing Date). Investors should be aware that
if the Ending Portfolio Value does not exceed
the Starting Portfolio Value by more than 12%
to 18% (the actual percentage will be
determined on the Pricing Date), beneficial
owners of the Securities will receive only
the principal amount thereof. A beneficial
owner of the Securities may receive no
Supplemental Redemption Amount at maturity,
or a Supplemental Redemption Amount that is
below what the Company would pay as interest
as of the date hereof if the Company issued
non-callable senior debt securities with a
similar maturity as that of the Securities.
The return of principal of the Securities at
maturity and the payment of the Supplemental
Redemption Amount, if any, may not reflect
the full opportunity costs implied by
inflation or other factors relating to the
time value of money.

There is little precedent to indicate how the
Securities will trade in the secondary market
or whether such market will be liquid. It is
expected that the secondary market for the
Securities will be affected by the
creditworthiness of the Company and by a
number

S-4
<PAGE>

of other factors. The trading value of the
Securities is expected to depend
substantially on the extent of the
appreciation, if any, of the Portfolio Value
over the Benchmark Portfolio Value. See "The
Portfolio--Historical Information" in this
Prospectus Supplement for historical values
of the Portfolio Securities. If, however,
Securities are sold prior to the maturity
date at a time when the Portfolio Value
exceeds the Benchmark Portfolio Value, the
sale price may be at a substantial discount
from the amount expected to be payable to the
beneficial owner if such excess of the
Portfolio Value over the Benchmark Portfolio
Value were to prevail until maturity of the
Securities because of the possible
fluctuation of the Portfolio Value between
the time of such sale and the time that the
Ending Portfolio Value is determined.
Furthermore, the price at which a beneficial
owner will be able to sell Securities prior
to maturity may be at a discount, which could
be substantial, from the principal amount
thereof, if, at such time the Portfolio is
below, equal to or not sufficiently above the
Benchmark Portfolio Value. A discount could
also result from rising interest rates.

Beneficial owners of the Securities will
receive a payment at maturity which will be
based on the value of the Portfolio, but will
not have any right to receive any of the
Portfolio Securities. The Portfolio does not
reflect the payment of dividends on the
stocks underlying it and, therefore, the
yield based on the Portfolio to the maturity
of the Securities will not produce the same
yield as if such underlying stocks were
purchased and held for a similar period. See
"Risk Factors" in this Prospectus Supplement.

The value of the Portfolio and the
Supplemental Redemption Amount, if any, may
be adversely affected by political, economic
and other developments that affect the stocks
underlying the Portfolio. Since the stocks
underlying the Portfolio are of companies
involved in various segments of the
healthcare industry and the biotechnology
industry, factors affecting these industries
may affect the value of the Portfolio and
therefore the trading value of the
Securities.

It is suggested that prospective investors
who consider purchasing the Securities should
reach an investment decision only after
carefully considering the suitability of the
Securities in light of their particular
circumstances.

Investors should also consider the tax
consequences of investing in the Securities,
including the effect of certain recent tax
law changes. See "Certain United States
Federal Income Tax Considerations" in this
Prospectus Supplement.

S-5
<PAGE>

RISK FACTORS

PAYMENT AT MATURITY

"Benchmark Portfolio Value will Exceed Value of Starting Portfolio Value on
the Pricing Date. On the Pricing Date, the Benchmark Portfolio Value will
exceed the Starting Portfolio Value by 12% to 18% (the actual percentage will
be determined on the Pricing Date). Investors should be aware that if, at
maturity, the Ending Portfolio Value does not exceed the Starting Portfolio
Value by more than 12% to 18% (the actual percentage will be determined on the
Pricing Date), beneficial owners of the Securities will receive only the
principal amount thereof".

"Yield may be Below Market Interest Rates on the Pricing Date". A beneficial
owner of the Securities may receive no Supplemental Redemption Amount at
maturity, or a Supplemental Redemption Amount that is below what the Company
would pay as interest as of the Pricing Date if the Company issued non-
callable senior debt securities with a similar maturity as that of the
Securities. The return of principal of the Securities at maturity and the
payment of the Supplemental Redemption Amount, if any, may not reflect the
full opportunity costs implied by inflation or other factors relating to the
time value of money.

"Yield on Securities will not Reflect Dividends". The Portfolio does not
reflect the payment of dividends on the stocks underlying it and therefore the
yield based on the Portfolio to the maturity of the Securities will not
produce the same yield as if such underlying stocks were purchased and held
for a similar period.

"State Law Limit on Interest Paid". Because the 1983 Indenture provides that
the Securities will be governed by and construed in accordance with the laws
of New York, certain usury laws of New York State may apply. Under present New
York law, the maximum rate of interest is 25% per annum on a simple interest
basis. This limit may not apply to Securities in which $2,500,000 or more has
been invested. While the Company believes that New York law would be given
effect by a state or Federal court sitting outside of New York, state laws
frequently regulate the amount of interest that may be charged to and paid by
a borrower (including, in some cases, corporate borrowers). It is suggested
that prospective investors consult their personal advisors with respect to the
applicability of such laws. The Company will covenant for the benefit of the
Holders of the Securities, to the extent permitted by law, not to claim
voluntarily the benefits of any laws concerning usurious rates of interest
against a Holder of the Securities.

TRADING

Application will be made to list the Securities on the AMEX under the symbol
"MLH". There is little precedent to indicate how the Securities will trade in
the secondary market or whether such market will be liquid. It is expected
that the secondary market for the Securities will be affected by the
creditworthiness of the Company and by a number of other factors. The tax
treatment of the Securities as described in "Certain United States Federal
Income Tax Considerations" in this Prospectus Supplement may make the
Securities a less appealing investment for investors who would otherwise hold
the Securities in taxable accounts.

The trading value of the Securities is expected to depend substantially on
the extent of the appreciation, if any, of the Portfolio Value over the
Benchmark Portfolio Value. See "The Portfolio--Historical Information" in this
Prospectus Supplement for historical values of the Portfolio. If, however,
Securities are sold prior to the maturity date at a time when the Portfolio
Value exceeds the Benchmark Portfolio Value, the sale price may be at a
substantial discount from the amount expected to be payable to the beneficial
owner if such excess of the Portfolio Value over the Benchmark Portfolio Value
were to prevail until maturity of the Securities because of the possible
fluctuation of the Portfolio between the time of such sale and the time that
the Ending Portfolio Value is determined. Furthermore, the price at which a
beneficial owner will be able to sell Securities prior to maturity may be at a
discount, which could be substantial, from the principal amount thereof, if,
at such time, the Portfolio is below, equal to, or not sufficiently above the
Benchmark Portfolio Value. A discount could also result from rising interest
rates.

S-6
<PAGE>

In addition to the value of the Portfolio, the trading value of the
Securities may be affected by a number of interrelated factors, including the
creditworthiness of the Company and those factors listed below. The
relationship among these factors is complex, including how these factors
affect the relative value of the principal amount of the Securities to be
repaid at maturity and the value of the Supplemental Redemption Amount.
Accordingly, investors should be aware that factors other than the level of
the Portfolio are likely to affect the Securities' trading value. The expected
effect on the trading value of the Securities of each of the factors listed
below, assuming in each case that all other factors are held constant, is as
follows:

"Interest Rates". Because the Securities repay at a minimum the principal
amount thereof at maturity, the trading value of the Securities will likely be
affected by changes in interest rates. In general, if U.S. interest rates
increase, the trading value of the Securities is expected to decrease. If U.S.
interest rates decrease, the trading value of the Securities is expected to
increase. Interest rates may also affect the U.S. economy, and, in turn, the
value of the Portfolio. Rising interest rates may lower the value of the
Portfolio and, thus, may decrease the trading value of the Securities. Falling
interest rates may increase the value of the Portfolio and, thus, may increase
the trading value of the Securities.

"Volatility of the Portfolio". If the volatility of the Portfolio Value
increases, the trading value of the Securities is expected to increase. If the
volatility of the Portfolio Value decreases, the trading value of the
Securities is expected to decrease.

"Time Remaining to Maturity". The Securities may trade at a value above that
which may be inferred from the level of interest rates and the Portfolio. This
difference will reflect a "time premium" due to expectations concerning the
value of the Portfolio during the period prior to maturity of the Securities.
As the time remaining to maturity of the Securities decreases, however, this
time premium is expected to decrease, thus decreasing the trading value of the
Securities. In addition, the price at which a beneficial owner may be able to
sell Securities prior to maturity may be at a discount, which may be
substantial, from the principal amount of the Securities if the value of the
Portfolio is below, equal to, or not sufficiently above the Benchmark
Portfolio Value.

"Dividend Rates in the United States". If dividend rates on the stocks
comprising the Portfolio increase, the trading value of the Securities is
expected to decrease. Conversely, if dividend rates on the stocks comprising
the Portfolio decrease, the value of the Securities is expected to increase.
However, in general, rising U.S. corporate dividend rates may increase the
value of the Portfolio and, in turn, increase the trading value of the
Securities. Conversely, falling U.S. corporate dividend rates may decrease the
value of the Portfolio and, in turn, decrease the trading value of the
Securities.

The impact of the factors specified above, excluding the value of the
Portfolio, may offset, partially or in whole, any increase in the trading
value of the Securities that is attributable to an increase in the value of
the Portfolio. For example, an increase in U.S. interest rates may cause the
Securities to trade at a discount from their initial offering price, even if
the Portfolio has appreciated significantly. In general, assuming all relevant
factors are held constant, the effect on the trading value of the Securities
of a given change in interest rates, Portfolio volatility and/or dividend
rates of stocks comprising the Portfolio is expected to be less if it occurs
later in the term of the Securities than if it occurs earlier in the term of
the Securities. The effect on the trading value of the Securities of a given
appreciation of the Portfolio in excess of the Benchmark Portfolio Value is
expected to be greater if it occurs later in the term of the Securities than
if it occurs earlier in the term of the Securities, assuming all other
relevant factors are held constant.

THE PORTFOLIO

The value of the Portfolio and the Supplemental Redemption Amount, if any,
may be adversely affected by political, economic and other developments that
affect the stocks underlying the Portfolio. Since the stocks underlying the
Portfolio are of companies involved in various segments of the healthcare
industry and the biotechnology industry, factors affecting these industries
may affect the value of the Portfolio and therefore the trading value of the
Securities. See "The Portfolio--Healthcare and Biotechnology Industries".

S-7
<PAGE>

OTHER CONSIDERATIONS

It is suggested that prospective investors who consider purchasing the
Securities should reach an investment decision only after carefully
considering the suitability of the Securities in light of their particular
circumstances.

Investors should also consider the tax consequences of investing in the
Securities, including the effect of certain recent tax law changes. See
"Certain United States Federal Income Tax Considerations" in this Prospectus
Supplement.

Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S") or its affiliates may from time to time engage in transactions
involving the stocks underlying the Portfolio for their proprietary accounts
and for other accounts under their management, which may influence the value
of such stocks and therefore the value of the Securities. MLPF&S and its
affiliates will also be the counterparties to the hedge of the Company's
obligations under the Securities. See "Use of Proceeds" herein. Accordingly,
under certain circumstances, conflicts of interest may arise between MLPF&S's
responsibilities as Calculation Agent with respect to the Securities and its
obligations under its hedge and its status as a subsidiary of the Company.
Under certain circumstances, the duties of MLPF&S as Calculation Agent in
determining the existence of Market Disruption Events could conflict with the
interests of MLPF&S as an affiliate of the issuer of the Securities, Merrill
Lynch & Co., Inc., and with the interests of the holders of the Securities.

S-8
<PAGE>

RECENT DEVELOPMENTS

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 29, 1995, and Quarterly Report
on Form 10-Q for the period ended June 28, 1996 (the "Quarterly Report"). See
"Incorporation of Certain Documents by Reference" in the accompanying
Prospectus. The condensed consolidated financial statements contained in the
Quarterly Report are unaudited; however, in the opinion of management of the
Company, all adjustments (consisting only of normal recurring accruals)
necessary for a fair statement of the results of operations have been
included.

The 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>
SIX MONTHS ENDED
---------------------------
JUNE 30, JUNE 28,
INCOME STATEMENT INFORMATION 1995 1996
- ---------------------------- --------------- -----------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C>
Revenues............................................ $ 10,789 $ 12,209
Net revenues(1)..................................... $ 4,970 $ 6,641
Earnings before income taxes........................ $ 843 $ 1,369
Net earnings........................................ $ 510 $ 843
Ratio of earnings to fixed charges(2)............... 1.1 1.2
<CAPTION>
AT DECEMBER 29, AT JUNE 28,
BALANCE SHEET INFORMATION(3) 1995 1996
- ---------------------------- --------------- -----------
(IN MILLIONS)
<S> <C> <C>
Total assets........................................ $176,857 $205,175
Long-term borrowings................................ $ 17,340 $ 22,640
Stockholders' equity................................ $ 6,141 $ 6,514
</TABLE>

- --------
(1) Net Revenues are revenues net of interest expense.
(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,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
(3) To finance its diverse activities, the Company and certain of its
subsidiaries borrow substantial amounts of short-term funds on a regular
basis. Although the amount of short-term borrowings significantly varies
with the level of general business activity, on June 28, 1996, $2,696
million of bank loans and $18,393 million of commercial paper were
outstanding. In addition, certain of the Company's subsidiaries lend
securities and enter into repurchase agreements to obtain financing. At
June 28, 1996, cash deposits for securities loaned and securities sold
under agreements to repurchase amounted to $3,591 million and $62,865
million, respectively. From June 29, 1996 to August 23, 1996, long-term
borrowings, net of repayments and repurchases, increased by approximately
$957 million.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 28, 1996

Global financial markets continued to be buoyant throughout the 1996 first
half, after strong performances in 1995. Issuer and investor demand and lower
interest rates relative to a year ago, led to higher industrywide revenues
from underwriting, trading, commissions and merger and acquisition services.

Net earnings for the first six months of 1996 were a record $843 million, up
65% from $510 million reported in the 1995 first half. Earnings per common
share were $4.22 primary and $4.21 fully diluted, compared with

S-9
<PAGE>

$2.48 primary and $2.46 fully diluted in the 1995 first half. Total revenues
for the first six months of 1996 were a record $12,209 million, up 13% from
the 1995 first half. Net revenues (revenues after interest expense) totaled
$6,641 million, up 34% from the year-ago period.

Commissions revenues rose 35% to a record $1,959 million from $1,450 million
in the 1995 first half. Commissions revenues from listed securities increased
due to higher trading volumes on most major U.S. and international exchanges.
Mutual fund commissions revenues rose to a record level due to strong sales of
U.S. and offshore funds and higher distribution fees.

Interest and dividend revenues decreased to $6,050 million from $6,325
million in the 1995 first half. Interest expense, which includes dividend
expense, decreased to $5,568 million from $5,819 million in the year-ago
period. Net interest and dividend profit declined to $482 million from $506
million in the 1995 first half as a result of reduced levels of interest-
earning assets.

Principal transactions revenues rose to a record $1,891 million, up 47% from
the 1995 first half as increased client activity led to higher revenues in
most product categories. Equities and equity derivatives trading revenues were
up 62% to $637 million. International equities trading revenues benefited from
the addition of trading activity related to Smith New Court PLC ("Smith New
Court"), which was acquired in the 1995 third quarter. Over-the-counter equity
trading revenues rose due to increased client order flow. Taxable fixed-income
trading revenues rose 73% to $509 million primarily due to higher revenues
from mortgage-backed products and corporate bonds. Mortgage-backed securities
trading revenues advanced due primarily to improved liquidity and increased
customer demand compared with the year-ago period. Trading revenues for
corporate bonds advanced due primarily to higher demand for U.S. and U.K. debt
products. Trading revenues from interest rate and currency swaps increased 18%
to $505 million due to higher revenues from both U.S. and non-U.S. dollar-
denominated transactions. Municipal securities revenues increased 19% to $168
million largely due to increased investor demand for tax-exempt investments.
Foreign exchange and commodities trading revenues, in the aggregate, rose 125%
from the 1995 first half to $72 million. Strong customer activity fueled by
increased volatility in exchange rates led to higher foreign exchange trading
revenues.

Investment banking revenues for the 1996 six-month period were a record $958
million, up 64% from $584 million in the 1995 first half due to increased
transaction volumes as well as improved market shares for strategic services.
Revenues from equity, high-yield debt, and corporate bond and preferred stock
underwritings were approximately double those of the 1995 first half.
Strategic services revenues benefited from increased fees from mergers and
acquisitions.

Asset management and portfolio service fees were $1,090 million, up 19% from
$913 million in the first half of 1995, primarily as a result of strong
inflows of client assets. Other revenues were $261 million, up 15% from $228
million reported in the 1995 first half, primarily due to gains on sales from
Real Estate Mortgage Investment Conduit ("REMIC") transactions.

Non-interest expenses were $5,272 million, up 28% from $4,127 million in the
year-ago period. Compensation and benefits expense, which represented
approximately 65% of non-interest expenses, increased 33% from the 1995 first
half due primarily to higher variable compensation related to increased
profitability and business volume. Compensation and benefits expense as a
percentage of net revenues was 51.7% in the 1996 first half compared with
51.9% in the year-ago period.

Occupancy cost increased 4% from the 1995 first half due to international
growth, including the addition of Smith New Court facilities. Other
facilities-related costs, which include communications and equipment rental
expense and depreciation and amortization expense, rose 15% primarily due to
increased levels of business activity, as well as higher depreciation expense
from the purchase of technology-related assets over the past year.

Professional fees increased 32% from the year-ago period primarily as a
result of higher systems development costs related to upgrading technology and
processing capabilities. Advertising and market

S-10
<PAGE>

development expenses rose 31% from the 1995 first half largely due to higher
international travel, advertising and client promotion costs. Brokerage,
clearing, and exchange fees increased 17% from the 1995 first half as a result
of higher trading volumes, particularly in international equity markets. Other
expenses increased 20% from the 1995 first half, primarily due to provisions
related to various business activities and amortization of goodwill.

Income tax expense totaled $526 million for the first half of 1996. The
effective tax rate for the first six months of 1996 was 38.4%, compared with
39.5% in the year-ago period. The decrease in the effective tax rate was
primarily attributable to lower state taxes and expanded international
business activities.

CERTAIN BALANCE SHEET INFORMATION AS OF JUNE 28, 1996

The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.

In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market making, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers and the
liquidity of the market for such securities, in addition to the usual risks
associated with investing in, financing, underwriting, and trading in
investment grade instruments.

At June 28, 1996, the fair value of long and short non-investment grade
trading inventories amounted to $8,452 million and $1,282 million,
respectively, and in the aggregate (i.e. the sum of long and short trading
inventories) represented 9.0% of aggregate consolidated trading inventories.

At June 28, 1996, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $293 million
(excluding unutilized revolving lines of credit and other lending commitments
of $117 million), consisting primarily of senior term and subordinated
financings to 37 medium-sized corporations. At June 28, 1996, the Company had
no bridge loans outstanding. A $90 million bridge loan outstanding on March
29, 1996 was repaid during the 1996 second quarter, and a $100 million bridge
loan commitment made after March 29, 1996 was canceled before June 28, 1996.
Subsequent to June 28, 1996, the Company entered into a bridge loan commitment
for $135 million to a non-investment grade counterparty. The Company intends
to syndicate the loan, if extended, and may retain a residual portion. Direct
equity investments made in conjunction with the Company's investment and
merchant banking activities aggregated $161 million at June 28, 1996,
representing investments in 62 enterprises. At June 28, 1996, the Company held
interests in partnerships, totaling $79 million (recorded on the cost basis),
that invest in highly leveraged transactions and non-investment grade
securities. At June 28, 1996, the Company also committed to invest an
additional $80 million in partnerships that invest in leveraged transactions.

The Company's insurance subsidiaries hold non-investment grade securities.
Non-investment grade securities were 5.0% of total insurance investments at
June 28, 1996. Non-investment grade securities of insurance subsidiaries are
classified as available-for-sale and are carried at fair value.

At June 28, 1996, the largest non-investment grade concentration consisted
of various sovereign and corporate issues of a South American sovereign
totaling $861 million, which primarily represented hedges of other financial
instruments. No one industry sector accounted for more than 27% of total non-
investment trade positions. At June 28, 1996, the Company held an aggregate
carrying value of $140 million in debt and equity securities of issuers in
various stages of bankruptcy proceedings or in default, of which 70% resulted
from the Company's market making activities in such securities.

S-11
<PAGE>

DESCRIPTION OF SECURITIES

GENERAL

The Securities are to be issued as a series of Senior Debt Securities under
the Senior Indenture, referred to as the "1983 Indenture", which is more fully
described in the accompanying Prospectus. The Securities will mature on
October , 2001.

While at maturity a beneficial owner of a Security will receive the
principal amount of such Security plus the Supplemental Redemption Amount, if
any, there will be no other payment of interest, periodic or otherwise. (See
"Payment at Maturity" below.)

The Securities are not subject to redemption by the Company or at the option
of any beneficial owner prior to maturity. Upon the occurrence of an Event of
Default with respect to the Securities, beneficial owners of the Securities
may accelerate the maturity of the Securities, as described under "Description
of Securities--Events of Default and Acceleration" in this Prospectus
Supplement and "Description of Debt Securities--General--Events of Default" in
the accompanying Prospectus.

The Securities are to be issued in denominations of whole Units.

PAYMENT AT MATURITY

At maturity, a beneficial owner of a Security will be entitled to receive
the principal amount thereof plus a Supplemental Redemption Amount, if any,
all as provided below. If the Ending Portfolio Value does not exceed the
Benchmark Portfolio Value a beneficial owner of a Security will be entitled to
receive only the principal amount thereof.

At maturity, a beneficial owner of a Security will be entitled to receive,
with respect to each such Security, (i) the principal amount thereof ($10 for
each Unit), and (ii) the Supplemental Redemption Amount equal in amount to:

Ending Portfolio Value - Benchmark Portfolio Value
Principal Amount X --------------------------------------------------
Benchmark Portfolio Value

provided, however, that in no event will the Supplemental Redemption Amount be
less than zero. The Benchmark Portfolio Value will be the Starting Portfolio
Value on the Pricing Date multiplied by a factor equal to 112% to 118% as
determined by the Company on the Pricing Date. Based on the individual prices
of the Portfolio Securities on the date that the Securities are priced for
initial offering to the public, the Multiplier for each Portfolio Security
will be initially set by the AMEX so that, on the Pricing Date, the Portfolio
Securities are equally dollar-weighted in the Portfolio and the Portfolio
Value equals 100 (the "Starting Portfolio Value"). The Benchmark Portfolio
Value will be set forth in the final form of the Prospectus Supplement
delivered to investors in connection with sales of the Securities. The Ending
Portfolio Value will be determined by Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Calculation Agent") and will equal the average (arithmetic
mean) of the closing values of the Portfolio determined on each of the first
five Calculation Days during the Calculation Period. If there are fewer than
five Calculation Days, then the Ending Portfolio Value will equal the average
(arithmetic mean) of the closing values of the Portfolio on such Calculation
Days, and if there is only one Calculation Day, then the Ending Portfolio
Value will equal the closing value of the Portfolio on such Calculation Day.
If no Calculation Days occur during the Calculation Period because of Market
Disruption Events, then the Ending Portfolio Value will equal the closing
value of the Portfolio determined on the last scheduled Portfolio Business Day
in the Calculation Period, regardless of the occurrence of a Market Disruption
Event on such day. The "Calculation Period" means the period from and
including the seventh scheduled Portfolio Business Day prior to the maturity
date to and including the second scheduled Portfolio Business Day prior to the
maturity date. "Calculation Day" means any Portfolio Business Day during the
Calculation Period on which a Market Disruption Event has not occurred. For
purposes of determining the Ending Portfolio Value, a "Portfolio Business Day"
is a day on which the AMEX is open for trading and trading generally occurs in
the over-the-counter market for equity securities and the Portfolio or any
Successor Portfolio is calculated and published. All determinations made by
the Calculation Agent shall be at the sole discretion of the Calculation

S-12
<PAGE>

Agent and, absent a determination by the Calculation Agent of a manifest
error, shall be conclusive for all purposes and binding on the Company and
beneficial owners of the Securities.

The following table illustrates, for a range of hypothetical Ending
Portfolio Values, (i) the total amount payable at maturity for each $10
principal amount of Securities (assuming a Benchmark Portfolio Value which
equals 115% (the midpoint of an expected offering range of 112% to 118%) of
the Starting Portfolio Value), (ii) the pretax annualized rate of return to
beneficial owners of Securities, and (iii) the pretax annualized rate of
return of an investment in the stocks underlying the Portfolio (which includes
an assumed aggregate dividend yield of 0.28% per annum, as more fully
described below).

<TABLE>
<CAPTION>
TOTAL PRETAX PRETAX ANNUALIZED
PERCENTAGE CHANGE AMOUNT ANNUALIZED RATE OF RATE OF RETURN OF
HYPOTHETICAL ENDING OVER THE STARTING PAYABLE AT RETURN ON THE STOCK UNDERLYING
PORTFOLIO VALUE PORTFOLIO VALUE MATURITY(1) SECURITIES(2) THE PORTFOLIO(2)(3)
------------------- ----------------- ----------- ------------------ -------------------
<S> <C> <C> <C> <C>
50 -50% $ 10.00 0.00% -13.09%
60 -40% $ 10.00 0.00% -9.66%
70 -30% $ 10.00 0.00% -6.71%
80 -20% $ 10.00 0.00% -4.11%
90 -10% $ 10.00 0.00% -1.79%
100(4) 0% $ 10.00 0.00% 0.28%
110 10% $ 10.00 0.00% 2.23%
120 20% $ 10.43 0.85% 4.00%
130 30% $ 11.30 2.47% 5.64%
140 40% $ 12.17 3.97% 7.17%
150 50% $ 13.04 5.39% 8.60%
160 60% $ 13.91 6.72% 9.96%
170 70% $ 14.78 7.97% 11.23%
180 80% $ 15.65 9.16% 12.45%
190 90% $ 16.52 10.30% 13.60%
200 100% $ 17.39 11.38% 14.70%
210 110% $ 18.26 12.41% 15.75%
220 120% $ 19.13 13.40% 16.76%
230 130% $ 20.00 14.35% 17.77%
240 140% $ 20.87 15.27% 18.66%
250 150% $ 21.74 16.15% 19.56%
</TABLE>
- --------
(1) The total amount payable at maturity assumes a Benchmark Portfolio Value
which equals 115% (the midpoint of an expected offering range of 112% to
118%) of the Starting Portfolio Value.
(2) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(3) This rate of return assumes (i) an investment of a fixed amount in the
stocks underlying the Portfolio with the allocation of such amount
reflecting the relative weights of such stocks in the Portfolio; (ii) a
percentage change in the aggregate price of such stocks that equals the
percentage change in the Portfolio from the Starting Portfolio Value to
the relevant hypothetical Ending Portfolio Value; (iii) a constant
dividend yield of 0.28% per annum, paid quarterly from the date of initial
delivery of Securities, applied to the value of the Portfolio at the end
of each such quarter assuming such value increases or decreases linearly
from the Starting Portfolio Value to the applicable hypothetical Ending
Portfolio Value; (iv) no transaction fees or expenses; (v) a five year
maturity of the Securities from the date of issuance; and (vi) a final
Portfolio value equal to the Ending Portfolio Value. The aggregate
dividend yield of the stocks underlying the Portfolio as of August 21,
1996 was approximately 0.28% per annum.
(4) The Starting Portfolio Value would be set at 100 based on the closing
prices on the Pricing Date.

The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the pretax annualized
rate of return resulting therefrom will depend entirely on the

S-13
<PAGE>

actual Ending Portfolio Value determined by the Calculation Agent as provided
herein. Historical data regarding the Portfolio is included in this Prospectus
Supplement under "The Portfolio--Historical Information".

ADJUSTMENTS TO THE PORTFOLIO; MARKET DISRUPTION EVENTS

If at any time the method of calculating the Portfolio Value, or the value
thereof, is changed in any material respect, or if the Portfolio is in any
other way modified so that such Portfolio Value does not, in the opinion of
the Calculation Agent, fairly represent the Portfolio Value had such changes
or modifications not been made, then, from and after such time, the
Calculation Agent shall, at the close of business in New York, New York, on
each date that the closing value with respect to the Ending Portfolio Value is
to be calculated, make such adjustments as, in the good faith judgment of the
Calculation Agent, may be necessary in order to arrive at a calculation of a
value of a stock index comparable to the Portfolio Value as if such changes or
modifications had not been made, and calculate such closing value with
reference to the Portfolio Value, as adjusted. Accordingly, if the method of
calculating the Portfolio Value is modified so that the Portfolio Value is a
fraction or a multiple of what it would have been if it had not been modified
(e.g., due to a split in the Portfolio Value), then the Calculation Agent
shall adjust such Portfolio Value in order to arrive at a Portfolio Value as
if it had not been modified (e.g., as if such split had not occurred).

"Market Disruption Event" means either of the following events, as
determined by the Calculation Agent:

(i) the suspension or material limitation (limitations pursuant to New
York Stock Exchange Rule 80A (or any applicable rule or regulation enacted
or promulgated by the New York Stock Exchange or any other self regulatory
organization or the Securities and Exchange Commission of similar scope as
determined by the Calculation Agent) on trading during significant market
fluctuations shall be considered "material" for purposes of this
definition) in the trading of three or more of the Portfolio Securities on
any exchange in the United States or in the over-the-counter market for
more than two hours of trading or during the period one-half hour prior to
the close of such trading, or

(ii) the suspension or material limitation (whether by reason of
movements in price otherwise exceeding levels permitted by the relevant
exchange or otherwise) in the trading of option contracts related to three
or more of the Portfolio Securities traded on any exchange for more than
two hours of trading or during the period one-half hour prior to the close
of such trading.

For the purposes of this definition, a limitation on the hours in a trading
day and/or number of days of trading will not constitute a Market Disruption
Event if it results from an announced change in the regular business hours of
the relevant exchange.

DISCONTINUANCE OF THE PORTFOLIO

If the AMEX discontinues publication of the Portfolio Value and the AMEX or
another entity publishes a successor or substitute index that the Calculation
Agent determines, in its sole discretion, to be comparable to such Portfolio
Value (any such index being referred to hereinafter as a "Successor Portfolio
Value"), then, upon the Calculation Agent's notification of such determination
to the Trustee and the Company, the Calculation Agent will substitute the
Successor Portfolio Value as calculated by the AMEX or such other entity for
the Portfolio Value and calculate the Ending Portfolio Value as described
above under "Payment at Maturity". Upon any selection by the Calculation Agent
of a Successor Portfolio Value, the Company shall cause notice thereof to be
given to Holders of the Securities.

If the AMEX discontinues publication of the Portfolio Value and a Successor
Portfolio Value is not selected by the Calculation Agent or is no longer
published on any of the Calculation Days, the value to be substituted for the
Portfolio Value for any such Calculation Day used to calculate the
Supplemental Redemption Amount at maturity will be a value computed by the
Calculation Agent for each Calculation Day in accordance with the procedures
last used to calculate the Portfolio Value prior to any such discontinuance.
If a Successor Portfolio Value is selected or the Calculation Agent calculates
a value as a substitute for the Portfolio Value as described below, such
Successor Portfolio Value or value shall be substituted for the Portfolio
Value for all purposes, including for purposes of determining whether a Market
Disruption Event exists.

S-14
<PAGE>

If the AMEX discontinues publication of the Portfolio Value prior to the
period during which the Supplemental Redemption Amount is to be determined and
the Calculation Agent determines that no Successor Portfolio Value is
available at such time, then on each Business Day until the earlier to occur
of (i) the determination of the Ending Portfolio Value and (ii) a
determination by the Calculation Agent that a Successor Portfolio Value is
available, the Calculation Agent shall determine the value that would be used
in computing the Supplemental Redemption Amount as described in the preceding
paragraph as if such day were a Calculation Day. The Calculation Agent will
cause notice of each such value to be published not less often than once each
month in The Wall Street Journal (or another newspaper of general
circulation), and arrange for information with respect to such values to be
made available by telephone. Notwithstanding these alternative arrangements,
discontinuance of the publication of the Portfolio Value may adversely affect
trading in the Securities.

EVENTS OF DEFAULT AND ACCELERATION

In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a beneficial owner of a
Security upon any acceleration permitted by the Securities, with respect to
each $10 principal amount thereof, will be equal to: (i) the initial issue
price ($10), plus (ii) an additional amount of contingent interest calculated
as though the date of early repayment were the maturity date of the
Securities. See "Description of Securities--Payment at Maturity" in this
Prospectus Supplement. If a bankruptcy proceeding is commenced in respect of
the Company, the claim of the beneficial owner of a Security may be limited,
under Section 502(b)(2) of Title 11 of the United States Code, to the
principal amount of the Security plus an additional amount of contingent
interest calculated as though the date of the commencement of the proceeding
were the maturity date of the Securities.

In case of default in payment at the maturity date of the Securities
(whether at their stated maturity or upon acceleration), from and after the
maturity date the Securities shall bear interest, payable upon demand of the
beneficial owners thereof, at the rate of % per annum (to the extent that
payment of such interest shall be legally enforceable) on the unpaid amount
due and payable on such date in accordance with the terms of the Securities to
the date payment of such amount has been made or duly provided for.

DEPOSITORY

Upon issuance, all Securities will be represented by one or more fully
registered global securities (the "Global Securities"). Each such Global
Security will be deposited with, or on behalf of, The Depository Trust Company
("DTC"), as Depository, registered in the name of DTC or a nominee thereof.
Unless and until it is exchanged in whole or in part for Securities in
definitive form, no Global Security may be transferred except as a whole by
the Depository to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository or by such
Depository or any such nominee to a successor of such Depository or a nominee
of such successor.

DTC has advised the Company as follows: DTC is a limited-purpose trust
company organized under the Banking Law of the State of New York, a member of
the Federal Reserve System, a "clearing corporation" within the meaning of the
New York Uniform Commercial Code, and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Securities Exchange Act of 1934, as
amended. DTC was created to hold securities of its participants
("Participants") and to facilitate the clearance and settlement of securities
transactions among its Participants in such securities through electronic
book-entry changes in accounts of the Participants, thereby eliminating the
need for physical movement of securities certificates. DTC's Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations.

DTC is owned by a number of Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").

S-15
<PAGE>

Purchases of Securities must be made by or through Participants, which will
receive a credit on the records of DTC. The ownership interest of each actual
purchaser of each Security ("Beneficial Owner") is in turn to be recorded on
the Participants' or Indirect Participants' records. Beneficial Owners will
not receive written confirmation from DTC of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Participant or Indirect Participant through which the Beneficial Owner entered
into the transaction. Ownership of beneficial interests in such Global
Security will be shown on, and the transfer of such ownership interests will
be effected only through, records maintained by DTC (with respect to interests
of Participants) and on the records of Participants (with respect to interests
of persons held through Participants). The laws of some states may require
that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability to own, transfer or pledge beneficial interests in Global Securities.

"So long as DTC, or its nominee, is the registered owner of a Global
Security, DTC or its nominee, as the case may be, will be considered the sole
owner or Holder of the Securities represented by such Global Security for all
purposes under the 1983 Indenture. Except as provided below, Beneficial Owners
in a Global Security will not be entitled to have the Securities represented
by such Global Securities registered in their names, will not receive or be
entitled to receive physical delivery of the Securities in definitive form and
will not be considered the owners or Holders thereof under the 1983 Indenture,
including for purposes of receiving any reports delivered by the Company or
the Trustee pursuant to the 1983 Indenture". Accordingly, each Person owning a
beneficial interest in a Global Security must rely on the procedures of DTC
and, if such Person is not a Participant, on the procedures of the Participant
through which such Person owns its interest, to exercise any rights of a
Holder under the 1983 Indenture. The Company understands that under existing
industry practices, in the event that the Company requests any action of
Holders or that an owner of a beneficial interest in such a Global Security
desires to give or take any action which a Holder is entitled to give or take
under the 1983 Indenture, DTC would authorize the Participants holding the
relevant beneficial interests to give or take such action, and such
Participants would authorize Beneficial Owners owning through such
Participants to give or take such action or would otherwise act upon the
instructions of Beneficial Owners. Conveyance of notices and other
communications by DTC to Participants, by Participants to Indirect
Participants, and by Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.

Payment of the principal of, and any Supplemental Redemption Amount with
respect to, Securities registered in the name of DTC or its nominee will be
made to DTC or its nominee, as the case may be, as the Holder of the Global
Securities representing such Securities. None of the Company, the Trustee or
any other agent of the Company or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests or for supervising
or reviewing any records relating to such beneficial ownership interests. The
Company expects that DTC, upon receipt of any payment of principal or any
Supplemental Redemption Amount in respect of a Global Security, will credit
the accounts of the Participants with payment in amounts proportionate to
their respective holdings in principal amount of beneficial interest in such
Global Security as shown on the records of DTC. The Company also expects that
payments by Participants to Beneficial Owners will be governed by standing
customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name", and will be the responsibility of such Participants.

If (x) any Depository is at any time unwilling or unable to continue as
Depository and a successor depository is not appointed by the Company within
60 days, (y) the Company executes and delivers to the Trustee a Company Order
to the effect that the Global Securities shall be exchangeable or (z) an Event
of Default has occurred and is continuing with respect to the Securities, the
Global Securities will be exchangeable for Securities in definitive form of
like tenor and of an equal aggregate principal amount, in denominations of $10
and integral multiples thereof. Such definitive Securities shall be registered
in such name or names as the Depository shall instruct the Trustee. It is
expected that such instructions may be based upon directions received by the
Depository from Participants with respect to ownership of beneficial interests
in such Global Securities.

S-16
<PAGE>

SAME-DAY SETTLEMENT AND PAYMENT

Settlement for the Securities will be made by the Underwriter in immediately
available funds. All payments of principal and the Supplemental Redemption
Amount, if any, will be made by the Company in immediately available funds so
long as the Securities are maintained in book-entry form.

THE PORTFOLIO

GENERAL

While the Portfolio consists of stocks of certain companies involved in
various segments of the healthcare industry and the biotechnology industry,
the Portfolio is not intended to provide an indication of the pattern of price
movements of common stocks of healthcare and biotechnology corporations
generally. All of the Portfolio Securities are registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Companies with
securities registered under the Exchange Act are required to file periodically
certain financial and other information specified by the Securities and
Exchange Commission (the "Commission"). Information provided to or filed with
the Commission is available at the offices of the Commission and at the Web
site specified under "Available Information" in the attached Prospectus.
Neither the Company nor MLPF&S makes any representation or warranty as to the
accuracy or completeness of such reports. THE INCLUSION OF A PORTFOLIO
SECURITY IN THE PORTFOLIO IS NOT A RECOMMENDATION TO BUY OR SELL SUCH
PORTFOLIO SECURITY AND NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES MAKE ANY
REPRESENTATION TO ANY PURCHASER OF SECURITIES AS TO THE PERFORMANCE OF THE
PORTFOLIO.

The Company or its affiliates may presently or from time to time engage in
business with one or more of the issuers of the Portfolio Securities,
including extending loans to, or making equity investments in, such issuers or
providing advisory services to such issuers, including merger and acquisition
advisory services. In the course of such business, the Company or its
affiliates may acquire non-public information with respect to such issuers
and, in addition, one or more affiliates of the Company may publish research
reports with respect to such issuers. The Company does not make any
representation to any purchaser of Securities with respect to any matters
whatsoever relating to such issuers. Any prospective purchaser of a Security
should undertake an independent investigation of the issuers of the Portfolio
Securities as in its judgment is appropriate to make an informed decision with
respect to an investment in the Securities.

"Healthcare and Biotechnology Industries"

The healthcare industry is subject to various federal, state and local laws
and regulations which are frequently subject to change in many ways that can
affect the price of the stocks of companies involved in such industry.

A number of legislative bills and proposals to regulate, control or alter
substantially the methods of financing and delivering healthcare, including
proposals covering cost controls, imposition of charitable care requirements,
national health insurance, incentives for competition in the provision of
healthcare insurance premiums, catastrophic illness coverage under Medicare, a
voucher system for Medicare, and the promotion of prepaid healthcare plans,
are currently under discussion, and certain of such bills have been introduced
in Congress. There are wide variations among these bills and proposals, and
the effect of these bills and proposals on the healthcare industry cannot be
determined at this time. Because of the many possible financial effects that
could result from an enactment of any of these bills and proposals, it is not
possible at this time to predict with assurance the effect on the prices of
Portfolio Securities and therefore the Securities if any of these bills or
proposals were enacted.

The biotechnology industry segment is subject to many of the same factors
that affect the healthcare industry. In addition, the products produced by
biotechnology companies often entail costly research and development and can
be subject to extensive regulatory review prior to approval for sale.

S-17
<PAGE>

COMPUTATION OF THE PORTFOLIO VALUE

The AMEX will generally calculate and disseminate the value of the Portfolio
based on the most recently reported prices of the Portfolio Securities (as
reported by the Exchanges), at approximately 15-second intervals during the
AMEX's business hours and at the end of each Portfolio Business Day via the
Consolidated Tape Association's Network B. The Portfolio Value, at any time,
will equal the sum of the products of such prices and the applicable
Multipliers for the Portfolio Securities. The Ending Portfolio Value, however,
is calculated by the Calculation Agent based on averaging the Portfolio Values
reported by the AMEX at the end of certain Portfolio Business Days. See
"Description of Securities--Payment at Maturity". The securities listed below
are the Portfolio Securities and will be used to calculate the value of the
Portfolio. Holders of the MITTS will not have any right to receive the
Portfolio Securities. The following table sets forth the issuers of the
Portfolio Securities, the exchanges, the percentage of each Portfolio Security
in the Starting Portfolio Value and the initial Multipliers:

<TABLE>
<CAPTION>
APPROXIMATE
MARKET
CAPITALIZATION % OF STARTING
ISSUER OF THE INDUSTRY AS OF PORTFOLIO INITIAL
PORTFOLIO SECURITY EXCHANGES SEGMENT JULY 31, 1996 VALUE MULTIPLIER(1)
------------------ --------- ------------------------------- -------------- ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Amgen Inc............... Nasdaq Biotechnology 14,754.01 3.8462%
Apria Healthcare Group
Inc. .................. NYSE Health--Specialty 1,343.92 3.8462%
Baxter International
Inc.................... NYSE Hospital Supplies 12,462.22 3.8462%
Beverly Enterprises..... NYSE Health--Long Term Care 1,049.17 3.8462%
Biogen, Inc. ........... Nasdaq Biotechnology 2,016.82 3.8462%
Chiron Corporation...... AMEX Biotechnology 3,763.54 3.8462%
Columbia/HCA Healthcare
Corporation............ NYSE Hospital Management 23,049.29 3.8462%
Emcare Holdings Inc. ... Nasdaq Health--Specialty 227.28 3.8462%
Genzyme Corporation..... Nasdaq Biotechnology 1,682.10 3.8462%
Genesis Health Ventures,
Inc.................... NYSE Health--Long Term Care 765.18 3.8462%
Health Management
Associates, Inc........ NYSE Hospital Management 2,019.37 3.8462%
Healthsource, Inc. ..... NYSE Health Maintenance Organization 859.65 3.8462%
Healthsouth
Corporation............ NYSE Health--Specialty 2,192.24 3.8462%
Humana Inc.............. NYSE Health Maintenance Organization 2,616.44 3.8462%
Johnson & Johnson....... NYSE Hospital Supplies 65,601.13 3.8462%
Medpartners/Mullikin,
Inc.................... NYSE Health Maintenance Organization 936.10 3.8462%
Neuromedical Systems,
Inc.................... Nasdaq Health--Specialty 385.31 3.8462%
Olsten Corporation...... NYSE Health--Specialty 1,705.03 3.8462%
Ornda Healthcorp........ NYSE Hospital Management 1,294.35 3.8462%
Oxford Health Plans,
Inc.................... Nasdaq Health Maintenance Organization 4,601.51 3.8462%
Phycor, Inc. ........... Nasdaq Health Maintenance Organization 1,724.83 3.8462%
Quorum Health Group,
Inc. .................. Nasdaq Hospital Management 1,193.18 3.8462%
Renal Treatment Centers,
Inc. .................. NYSE Health--Specialty 638.66 3.8462%
Tenet Healthcare
Corporation............ NYSE Hospital Management 4,239.67 3.8462%
Total Renal Care
Holdings, Inc. ........ NYSE Health--Specialty 765.76 3.8462%
United Healthcare
Corporation............ NYSE Health Maintenance Organization 6,220.65 3.8462%
</TABLE>
- --------
(1) Initial Multipliers will be determined on the date the Securities are
priced by the Company for initial offering to the public.

The initial Multiplier relating to each Portfolio Security indicates the
number of shares of such Portfolio Security, given the market price of such
Portfolio Security, required to be included in the calculation of the Starting
Portfolio Value so that each Portfolio Security represents an equal percentage
of the Starting Portfolio Value as of the date of this Prospectus Supplement.
The price of each Portfolio Security used to calculate the initial Multiplier
relating to each such Portfolio Security will be the closing price of such
Portfolio Security on the Pricing Date. The respective Multipliers will remain
constant for the term of the Securities unless adjusted for certain corporate
events, as described below.

S-18
<PAGE>

ADJUSTMENTS TO THE MULTIPLIER AND PORTFOLIO

The Multiplier with respect to any Portfolio Security and the Portfolio will
be adjusted as follows:

1. If a Portfolio Security is subject to a stock split or reverse stock
split, then once such split has become effective, the Multiplier relating
to such Portfolio Security will be adjusted to equal the product of the
number of shares issued with respect to one such share of such Portfolio
Security and the prior multiplier.

2. If a Portfolio Security is subject to a stock dividend (issuance of
additional shares of the Portfolio Security) that is given equally to all
holders of shares of the issuer of such Portfolio Security, then once the
dividend has become effective and such Portfolio Security is trading ex-
dividend, the Multiplier will be adjusted so that the new Multiplier shall
equal the former Multiplier plus the product of the number of shares of
such Portfolio Security issued with respect to one such share of such
Portfolio Security and the prior multiplier.

3. There will be no adjustments to the Multipliers to reflect cash
dividends or distributions paid with respect of a Portfolio Security other
than for Extraordinary Dividends as described below. A cash dividend with
respect to a Portfolio Security will be deemed to be an "Extraordinary
Dividend" if such dividend exceeds the immediately preceding non-
Extraordinary Dividend for such Portfolio Security by an amount equal to at
least 10% of the market price on the Portfolio Business Day preceding the
record day for the payment of such Extraordinary Dividend (the "ex-dividend
date"). If an Extraordinary Dividend occurs with respect to a Portfolio
Security, the Multiplier with respect to such Portfolio Security will be
adjusted on the ex-dividend date with respect to such Extraordinary
Dividend so that the new Multiplier will equal the product of (i) the then
current Multiplier, and (ii) a fraction, the numerator of which is the sum
of the Extraordinary Dividend Amount and the market price on the Trading
Day preceding the ex-dividend date, and the denominator of which is the
market price on the Trading Day preceding the ex-dividend date. The
"Extraordinary Dividend Amount" with respect to an Extraordinary Dividend
for a Portfolio Security will equal such Extraordinary Dividend minus the
amount of the immediately preceding non-Extraordinary Dividend for such
Portfolio Security.

4. If the issuer of a Portfolio Security is being liquidated or is
subject to a proceeding under any applicable bankruptcy, insolvency or
other similar law, such Portfolio Security will continue to be included in
the Portfolio so long as a market price for such Portfolio Security is
available. If a market price is no longer available for a Portfolio
Security for whatever reason, including the liquidation of the issuer of
such Portfolio Security or the subjection of the issuer of such Portfolio
Security to a proceeding under any applicable bankruptcy, insolvency or
other similar law, then the value of such Portfolio Security will equal
zero in connection with calculating the Portfolio Value and the Ending
Portfolio Value for so long as no market price is available, and no attempt
will be made to find a replacement stock or increase the value of the
Portfolio to compensate for the deletion of such Portfolio Security.

5. If the issuer of a Portfolio Security has been subject to a merger or
consolidation and is not the surviving entity or is nationalized, then a
value for such Portfolio Security will be determined at the time such
issuer is merged or consolidated or nationalized and will equal the last
available market price for such Portfolio Security and that value will be
constant for the remaining term of the Securities. At such time, no
adjustment will be made to the Multiplier of such Portfolio Security. The
Company may at its sole discretion increase such last available market
price to reflect payments or dividends of cash, securities or other
consideration to holders of such Portfolio Security in connection with such
a merger or consolidation which may not be reflected in such last available
market price.

6. If the issuer of a Portfolio Security issues to all of its
shareholders equity securities that are publicly traded of an issuer other
than the issuer of the Portfolio Security, then such new equity securities
will be added to the Portfolio as a new Portfolio Security. The Multiplier
for such new Portfolio Security will equal the product of the original
Multiplier with respect to the Portfolio Security for which the new
Portfolio Security is being issued (the "Original Portfolio Security") and
the number of shares of the new Portfolio Security issued with respect to
one share of the Original Portfolio Security.

S-19
<PAGE>

No adjustments of any Multiplier of a Portfolio Security will be required
unless such adjustment would require a change of at least 1% in the Multiplier
then in effect. The Multiplier resulting from any of the adjustments specified
above will be rounded to the nearest one thousandth with five ten-thousandths
being rounded upward.

The AMEX expects that no adjustments to the Multiplier of any Portfolio
Security or to the Portfolio will be made other than those specified above,
however, the AMEX may at its discretion make adjustments to maintain the
economic intent of the Portfolio.

HISTORICAL INFORMATION

The following table sets forth the high and low market price during 1991,
1992, 1993, 1994, 1995 and 1996 through July 31, 1996, and the market price on
July 31, 1996. All market prices are rounded to the nearest one-sixty-fourth
dollar. The historical prices of the Portfolio Securities should not be taken
as an indication of future performance, and no assurance can be given that the
prices of the Portfolio Securities will increase sufficiently to cause the
beneficial owners of the Securities to receive a Supplemental Redemption
Amount in excess of zero.

<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
-------------------- ------ ------ ------
<S> <C> <C> <C>
Amgen Inc.
1991...................................................... 38.000 9.422
1992...................................................... 39.125 24.625
1993...................................................... 35.875 15.500
1994...................................................... 30.125 17.375
1995...................................................... 59.750 28.063
1996...................................................... 65.500 51.500 54.625
Apria Healthcare Group Inc.
1991...................................................... * *
1992...................................................... 17.141 6.781
1993...................................................... 19.828 12.141
1994...................................................... 20.531 10.531
1995...................................................... 34.500 16.844
1996...................................................... 35.250 23.375 24.625
Baxter International Inc.
1991...................................................... 40.875 25.625
1992...................................................... 40.500 30.500
1993...................................................... 32.750 24.375
1994...................................................... 28.875 21.625
1995...................................................... 44.750 26.750
1996...................................................... 47.875 41.000 41.625
Beverly Enterprises
1991...................................................... 12.375 6.875
1992...................................................... 13.125 7.125
1993...................................................... 14.750 9.250
1994...................................................... 16.125 11.750
1995...................................................... 16.125 9.000
1996...................................................... 12.625 9.500 9.500
Biogen, Inc.
1991...................................................... 49.000 24.250
1992...................................................... 49.750 18.250
1993...................................................... 47.750 24.250
1994...................................................... 55.750 27.250
1995...................................................... 66.500 32.000
1996...................................................... 76.500 51.625 61.125
</TABLE>

S-20
<PAGE>

<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
-------------------- ------- ------ ------
<S> <C> <C> <C>
Chiron Corporation
1991..................................................... 79.000 37.250
1992..................................................... 56.500 34.750
1993..................................................... 86.875 40.000
1994..................................................... 96.000 50.750
1995..................................................... 113.750 47.750
1996..................................................... 119.250 82.750 84.500
Columbia/HCA Healthcare Corporation
1991..................................................... 18.500 9.750
1992..................................................... 22.000 13.750
1993..................................................... 33.875 16.250
1994..................................................... 45.250 33.250
1995..................................................... 54.000 35.375
1996..................................................... 58.000 48.250 54.250
Emcare Holdings Inc.
1991..................................................... * *
1992..................................................... * *
1993..................................................... * *
1994..................................................... 14.750 11.000
1995..................................................... 27.375 13.125
1996..................................................... 36.625 21.250 21.250
Genzyme Corporation
1991..................................................... 24.766 11.446
1992..................................................... 32.563 15.914
1993..................................................... 24.649 12.338
1994..................................................... 18.852 11.750
1995..................................................... 35.024 13.625
1996..................................................... 38.000 22.000 24.875
Genesis Health Ventures, Inc.
1991..................................................... 8.500 4.500
1992..................................................... 11.328 4.172
1993..................................................... 16.078 7.672
1994..................................................... 21.328 14.500
1995..................................................... 25.000 16.922
1996..................................................... 32.875 22.500 25.250
Health Management Associates, Inc.
1991..................................................... 5.266 2.141
1992..................................................... 5.656 3.703
1993..................................................... 8.672 3.109
1994..................................................... 11.859 8.000
1995..................................................... 18.000 10.438
1996..................................................... 23.750 18.000 20.125
Healthsource, Inc.
1991..................................................... 5.453 2.750
1992..................................................... 9.563 4.000
1993..................................................... 38.750 13.375
1994..................................................... 21.125 12.750
1995..................................................... 36.000 15.125
1996..................................................... 40.125 11.000 11.000
</TABLE>

S-21
<PAGE>

<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
-------------------- ------ ------ ------
<S> <C> <C> <C>
Healthsouth Corporation
1991...................................................... 17.578 7.328
1992...................................................... 18.625 7.625
1993...................................................... 13.188 6.063
1994...................................................... 19.688 11.688
1995...................................................... 32.375 16.375
1996...................................................... 38.250 30.000 30.375
Humana Inc.
1991...................................................... 12.500 8.109
1992...................................................... 10.516 6.063
1993...................................................... 19.125 6.125
1994...................................................... 25.375 15.750
1995...................................................... 28.000 17.000
1996...................................................... 28.750 15.625 16.750
Johnson & Johnson
1991...................................................... 29.063 16.344
1992...................................................... 29.344 21.500
1993...................................................... 25.188 17.813
1994...................................................... 28.250 18.000
1995...................................................... 46.188 26.813
1996...................................................... 50.000 43.750 47.750
Medpartners/Mullikin, Inc.
1991...................................................... * *
1992...................................................... * *
1993...................................................... * *
1994...................................................... * *
1995...................................................... 34.500 14.750
1996...................................................... 36.000 16.625 18.750
Neuromedical Systems, Inc.
1991...................................................... * *
1992...................................................... * *
1993...................................................... * *
1994...................................................... * *
1995...................................................... 21.500 18.375
1996...................................................... 26.500 11.375 14.375
Olsten Corporation
1991...................................................... 11.109 4.781
1992...................................................... 17.891 10.438
1993...................................................... 21.328 14.672
1994...................................................... 25.922 18.750
1995...................................................... 28.172 18.828
1996...................................................... 33.000 25.750 26.500
Ornda Healthcorp
1991...................................................... 14.750 5.000
1992...................................................... 15.250 5.625
1993...................................................... 15.750 5.250
1994...................................................... 22.375 10.500
1995...................................................... 24.000 11.125
1996...................................................... 29.500 20.250 23.000
</TABLE>

S-22
<PAGE>

<TABLE>
<CAPTION>
PORTFOLIO SECURITIES HIGH LOW LAST
-------------------- ------ ------ ------
<S> <C> <C> <C>
Oxford Health Plans, Inc.
1991...................................................... 3.063 1.719
1992...................................................... 7.094 3.375
1993...................................................... 14.000 3.906
1994...................................................... 20.875 9.875
1995...................................................... 41.875 19.250
1996...................................................... 52.250 31.063 34.500
Phycor, Inc.
1991...................................................... * *
1992...................................................... 5.109 2.438
1993...................................................... 9.188 4.000
1994...................................................... 12.438 7.484
1995...................................................... 34.000 10.891
1996...................................................... 40.500 27.000 30.750
Quorum Health Group, Inc.
1991...................................................... * *
1992...................................................... * *
1993...................................................... * *
1994...................................................... 22.750 16.250
1995...................................................... 23.875 17.250
1996...................................................... 27.375 22.936 23.500
Renal Treatment Centers, Inc.
1991...................................................... * *
1992...................................................... * *
1993...................................................... 11.000 5.500
1994...................................................... 12.875 5.750
1995...................................................... 23.500 10.375
1996...................................................... 34.000 20.063 28.000
Tenet Healthcare Corporation
1991...................................................... 51.625 12.625
1992...................................................... 18.125 9.625
1993...................................................... 14.500 6.500
1994...................................................... 19.500 12.500
1995...................................................... 20.750 13.375
1996...................................................... 22.500 18.375 19.375
Total Renal Care Holdings, Inc.
1991...................................................... * *
1992...................................................... * *
1993...................................................... * *
1994...................................................... * *
1995...................................................... 30.000 17.375
1996...................................................... 45.125 27.750 35.750
United Healthcare Corporation
1991...................................................... 19.563 5.000
1992...................................................... 29.188 17.125
1993...................................................... 39.375 20.000
1994...................................................... 55.375 37.250
1995...................................................... 65.625 34.125
1996...................................................... 67.375 31.000 33.750
</TABLE>
- --------
* No shares of the issuer were outstanding during the year

S-23
<PAGE>

HYPOTHETICAL HISTORICAL PORTFOLIO VALUES

The following table and graph set forth hypothetical Portfolio Values on the
last business day of each month from December 31, 1990 through July 31, 1996
(the "Historical Portfolio Values"). Except as described below, the Historical
Portfolio Values were calculated on the same basis as the Portfolio Value will
be calculated in the future. The Historical Portfolio Value of 100
corresponding to December 31, 1990 was set to provide an illustration of past
movements of the Historical Portfolio Value only. The Multiplier for each
Portfolio Security will be initially set so that the Starting Portfolio Value
equals 100 on the date the Securities are priced for initial offering to the
public. The Historical Portfolio Value at any given prior date was equal to
the sum of the products of the then current market prices for the relevant
Portfolio Securities on the last business day of the respective month and the
applicable Multipliers. For months during which one or more of the Portfolio
Securities were not outstanding and publicly traded, the Historical Portfolio
Value was calculated based upon the values of the remaining Portfolio
Securities that were then publicly traded. The Multipliers with respect to the
remaining publicly traded Portfolio Securities were adjusted to reflect the
increased weighting of each such remaining Portfolio Security. Only fourteen
of the twenty-six Portfolio Securities were outstanding during the entire
period illustrated below.

Historical Multipliers and the Portfolio were subject to the same
adjustments, as reported by securities pricing sources, as Multipliers will be
subject to described under "Description of Securities--Adjustments to the
Multiplier and Portfolio".

THE EXPERIENCE OF THE HISTORICAL PORTFOLIO VALUES SHOULD NOT BE TAKEN AS AN
INDICATION OF FUTURE PERFORMANCE OF THE PORTFOLIO VALUE AND NO ASSURANCE CAN
BE GIVEN THAT THE VALUE OF THE PORTFOLIO VALUE WILL NOT DECLINE AND THEREBY
RESULT IN REPAYMENT OF ONLY $10 FOR EACH $10 PRINCIPAL AMOUNT OF SECURITIES TO
BENEFICIAL OWNERS OF THE SECURITIES AT MATURITY OR OTHERWISE.

S-24
<PAGE>

<TABLE>
<CAPTION>
DATE HISTORICAL PORTFOLIO VALUE
---- --------------------------
<S> <C>
1990
December...................................... 100.000
1991
January....................................... 109.711
February (1).................................. 117.029
March......................................... 132.028
April (2)..................................... 126.981
May........................................... 132.192
June (3)...................................... 119.097
July.......................................... 131.914
August (4).................................... 134.265
September..................................... 135.428
October....................................... 138.584
November...................................... 125.018
December...................................... 146.985
1992
January (5)................................... 142.743
February (6).................................. 134.532
March......................................... 127.785
April......................................... 123.390
May........................................... 125.666
June.......................................... 119.769
July.......................................... 130.785
August........................................ 120.704
September..................................... 121.862
October....................................... 129.102
November...................................... 140.360
December...................................... 146.765
1993
January....................................... 139.522
February...................................... 118.711
March......................................... 114.047
April......................................... 118.042
May........................................... 127.623
June.......................................... 132.042
July (7)...................................... 130.631
August........................................ 127.943
September..................................... 138.253
October....................................... 145.576
November...................................... 147.611
December...................................... 163.501
1994
January....................................... 180.067
February...................................... 177.588
March......................................... 166.639
April......................................... 169.710
May (8)....................................... 174.471
June.......................................... 158.642
July.......................................... 169.580
</TABLE>

S-25
<PAGE>

<TABLE>
<CAPTION>
DATE HISTORICAL PORTFOLIO VALUE
---- --------------------------
<S> <C>
August........................................ 188.539
September..................................... 197.199
October....................................... 197.729
November...................................... 183.827
December (9).................................. 191.913
1995
January....................................... 195.722
February (10)................................. 199.202
March......................................... 214.092
April......................................... 202.444
May........................................... 195.222
June.......................................... 199.976
July.......................................... 218.811
August........................................ 228.749
September..................................... 248.665
October (11).................................. 245.010
November...................................... 271.590
December (12)................................. 284.963
1996
January....................................... 301.570
February...................................... 300.267
March......................................... 297.167
April......................................... 301.407
May........................................... 289.700
June.......................................... 272.096
July.......................................... 237.253
</TABLE>
- --------
(1) Health Management Associates, Inc. was included in the calculation of the
Historical Portfolio Value commencing this month.
(2) Healthsource, Inc. was included in the calculation of the Historical
Portfolio Value commencing this month.
(3) Genesis Health Ventures, Inc. was included in the calculation of the
Historical Portfolio Value commencing this month.
(4) Oxford Health Plans, Inc. was included in the calculation of the
Historical Portfolio Value commencing this month.
(5) Phycor, Inc. was included in the calculation of the Historical Portfolio
Value commencing this month.
(6) Apria Healthcare Group Inc. was included in the calculation of the
Historical Portfolio Value commencing this month.
(7) Renal Treatment Centers, Inc. was included in the calculation of the
Historical Portfolio Value commencing this month.
(8) Quorum Health Group, Inc. was included in the calculation of the
Historical Portfolio Value commencing this month.
(9) Emcare Holdings Inc. was included in the calculation of the Historical
Portfolio Value commencing this month.
(10) Medpartners/Mullikin, Inc. was included in the calculation of the
Historical Portfolio Value commencing this month.
(11) Total Renal Care Holdings, Inc. was included in the calculation of the
Historical Portfolio Value commencing this month.
(12) Neuromedical Systems, Inc. was included in the calculation of the
Historical Portfolio Value commencing this month.

S-26
<PAGE>

The following graph sets forth the hypothetical Historical Portfolio Values
on the last business day of each month from December 1990 through July 1996.
Past movements of the Historical Portfolio Values are not necessarily
indicative of future movements of the Portfolio Value.

[The graph sets forth the hypothetical Historical Portfolio Values on the last
business day of each month from December 1990 through July 1996 with the
vertical axis specifying the hypothetical month-end closing levels of the
Portfolio in a range from 0 to 350 in increments of 50, and the horizontal axis
specifying the time period in increments of three months from December 1990
through July 1996.]

The closing hypothetical Historical Portfolio Value on August 21, 1996 was
255.558.

S-27
<PAGE>

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

Set forth in full below is the opinion of Brown & Wood LLP, counsel to the
Company, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the Securities. Such opinion is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including retroactive changes in effective dates) or
possible differing interpretations. The discussion below deals only with
Securities 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, tax-
exempt entities, or persons holding Securities 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 herein). The following discussion also assumes that the
issue price of the Securities, as determined for United States Federal income
tax purposes, equals the principal amount thereof. Persons considering the
purchase of the Securities should consult their own tax advisors concerning
the application of the United Stated Federal income tax laws to their
particular situations as well as any consequences of the purchase, ownership
and disposition of the Securities arising under the laws of any other taxing
jurisdiction.

As used herein, the term "U.S. Holder" means a beneficial owner of a
Security 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 Security
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 Security that is not a U.S. Holder.

GENERAL

There are no statutory provisions, regulations, published rulings or
judicial decisions addressing or involving the characterization, for United
States Federal income tax purposes, of the Securities or securities with terms
substantially the same as the Securities. However, although the matter is not
free from doubt, under current law, each Security should be treated as a debt
instrument of the Company for United States Federal income tax purposes. The
Company currently intends to treat each Security 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 of the Securities. Prospective investors in the Securities
should be aware, however, that the IRS is not bound by the Company's
characterization of the Securities as indebtedness and the IRS could possibly
take a different position as to the proper characterization of the Securities
for United States Federal income tax purposes. The following discussion of the
principal United States Federal income tax consequences of the purchase,
ownership and disposition of the Securities is based upon the assumption that
each Security will be treated as a debt instrument of the Company for United
States Federal income tax purposes. If the Securities are not in fact treated
as debt instruments of the Company for United States Federal income tax
purposes, then the United States Federal income tax treatment of the purchase,
ownership and disposition of the Securities could differ from the treatment
discussed below with the result that the timing and character of income, gain
or loss recognized in respect of a Security could differ from the timing and
character of income, gain or loss recognized in respect of a Security had the
Securities in fact been treated as debt instruments of the Company for United
States Federal income tax purposes.

U.S. HOLDERS

On June 11, 1996, the Treasury Department issued final regulations (the
"Final Regulations") concerning the proper United States Federal income tax
treatment of contingent payment debt instruments such as the Securities, which
apply to debt instruments issued on or after August 13, 1996 and, accordingly,
will apply to the Securities. In general, the Final Regulations cause the
timing and character of income, gain or loss reported

S-28
<PAGE>

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. Specifically, the Final Regulations generally require a U.S.
Holder of such an instrument to include future contingent and noncontingent
interest payments in income as such interest accrues based upon a projected
payment schedule. Moreover, in general, under the Final Regulations, any gain
recognized by a U.S. Holder on the sale, exchange, or retirement of a
contingent payment debt instrument is treated as ordinary income and all or a
portion of any loss realized could be treated as ordinary loss as opposed to
capital loss (depending upon the circumstances). The Final Regulations provide
no definitive guidance as to whether or not an instrument is properly
characterized as a debt instrument for United States Federal income tax
purposes.

In particular, solely for purposes of applying the Final Regulations to the
Securities, the Company has determined that the projected payment schedule for
the Securities will consist of payment on the maturity date of the principal
amount thereof and a Supplemental Redemption Amount equal to $ . This
represents an estimated yield on the Securities equal to % per annum
(compounded semiannually). Accordingly, during the term of the Securities, a
U.S. Holder of a Security will be required to include in income as ordinary
interest an amount equal to the sum of the daily portions of interest on the
Security that are deemed to accrue at this estimated yield for each day during
the taxable year (or portion of the taxable year) on which the U.S. Holder
holds such Security. The amount of interest that will be deemed to accrue in
any accrual period (i.e., generally each six month period during which the
Securities are outstanding) will equal the product of this estimated yield
(properly adjusted for the length of the accrual period) and the Security's
adjusted issue price (as defined below) at the beginning of the accrual
period. The daily portions of interest will be determined by allocating to
each day in the accrual period the ratable portion of the interest that is
deemed to accrue during the accrual period. In general, for these purposes, a
Security's adjusted issue price will equal the Security's issue price (i.e.,
$10), increased by the interest previously accrued on the Security. At
maturity of a Security, in the event that the Supplemental Redemption Amount,
if any, exceeds $ , a U.S. Holder will be required to include the excess of
the Supplemental Redemption Amount over $ in income as ordinary interest on
the maturity date. Alternatively, in the event that the Supplemental
Redemption Amount, if any, is less than $ , the excess of $ over the
Supplemental Redemption Amount will be treated first as an offset to any
interest otherwise includible in income by the U.S. Holder with respect to the
Security for the taxable year in which the maturity date occurs to the extent
of the amount of such includible interest. A U.S. Holder will be permitted to
recognize and deduct, as an ordinary loss that is not subject to the
limitations applicable to miscellaneous itemized deductions, any remaining
portion of the excess of $ over the Supplemental Redemption Amount that is
not treated as an interest offset pursuant to the foregoing rules.

Upon the sale or exchange of a Security prior to the maturity date, a U.S.
Holder will be required to recognize taxable gain or loss in an amount equal
to the difference, if any, between the amount realized by the U.S. Holder upon
such sale or exchange and the U.S. Holder's adjusted tax basis in the Security
as of the date of disposition. A U.S. Holder's adjusted tax basis in a
Security generally will equal such U.S. Holder's initial investment in the
Security increased by any interest previously included in income with respect
to the Security by the U.S. Holder. Any such taxable gain generally will be
treated as ordinary income. Any such taxable loss generally will be treated as
ordinary loss to the extent of the U.S. Holder's total interest inclusions on
the Security. Any remaining loss generally will be treated as long-term or
short-term capital loss (depending upon the U.S. Holder's holding period for
the Security). All amounts includible in income by a U.S. Holder as ordinary
interest pursuant to the Final Regulations will be treated as original issue
discount.

Prospective investors in the Securities should be aware that if a
significant percentage of the total aggregate amount of the Securities
originally issued is sold at a discount from the principal amount thereof
(e.g., pursuant to the discounts noted on the cover of this Prospectus
Supplement), then the issue price of the Securities, as determined for United
States Federal income tax purposes, may be less than the principal amount of
the Securities. In such event, if a U.S. Holder purchases a Security for an
amount equal to the principal amount thereof, the amount of the difference
between the principal amount of the Securities and the issue price thereof
generally should be allocated by the U.S. Holder to daily portions of interest
that are deemed to accrue on each

S-29
<PAGE>

such date as an offset to such interest on each such date. In addition, on
each such date, the U.S. Holder's adjusted tax basis in the Security will be
reduced by the amount treated as an interest offset pursuant to the foregoing
rule. Alternatively, in the event that the issue price of the Securities, as
determined for United States Federal income tax purposes, equals the principal
amount thereof and a U.S. Holder purchases a Security for an amount that is
less than the principal amount thereof, the amount of the difference between
the principal amount of the Security and the amount paid by the U.S. Holder to
purchase the Security generally should be allocated by the U.S. Holder to
daily portions of interest that are deemed to accrue on each such date as
additional ordinary interest includible in income by the U.S. Holder on each
such date. In such event, on each such date, the U.S. Holder's adjusted tax
basis in the Security will be increased by the amount treated as additional
ordinary interest income. In addition, U.S. Holders purchasing a Security at a
price that differs from the adjusted issue price of the Security as of the
purchase date (e.g., subsequent purchasers) will be subject to special rules
providing for certain adjustments to the foregoing rules and such U.S. Holders
should consult their own tax advisors concerning these rules. Moreover, all
prospective investors in the Securities should consult their own tax advisors
concerning the application of the Final Regulations to their investment in the
Securities. Investors in the Securities may also obtain the projected payment
schedule, as determined by the Company for purposes of the application of the
Final Regulations to the Securities, by submitting a written request for such
information to at .

The projected payment schedule (including both the projected Supplemental
Redemption Amount and the estimated yield on the Securities) has been
determined solely for United States Federal income tax purposes (i.e., for
purposes of applying the Final Regulations to the Securities), and is not a
prediction of what the actual Supplemental Redemption Amount will be, or that
the actual Supplemental Redemption Amount will even exceed zero.

The following table sets forth the amount of interest that will be deemed to
have accrued with respect to the Securities during each accrual period over
the term of the Securities based upon the projected payment schedule for the
Securities (including both the projected Supplemental Redemption Amount and
the estimated yield equal to % per annum (compounded semiannually)) as
determined by the Company for purposes of the application of the Final
Regulations to the Securities:

S-30
<PAGE>

<TABLE>
<CAPTION>
TOTAL INTEREST DEEMED
INTEREST DEEMED TO TO HAVE ACCRUED ON
ACCRUE DURING ACCRUAL SECURITIES AS OF END
ACCRUAL PERIOD PERIOD OF ACCRUAL PERIOD
-------------- --------------------- ---------------------
<S> <C> <C>
September , 1996 through
October , 1996.............
October , 1996 through
April , 1997...............
April , 1997 through
October , 1997.............
October , 1997 through
April , 1998...............
April , 1998 through
October , 1998.............
October , 1998 through
April , 1999...............
April , 1999 through
October , 1999.............
October , 1999 through
April , 2000...............
April , 2000 through
October , 2000.............
October , 2000 through
April , 2001...............
April , 2001 through
October , 2001.............
</TABLE>

--------
Projected Supplemental Redemption Amount =

NON-U.S. HOLDERS

A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original
issue discount, if any) on a Security, unless such non-U.S. Holder is a direct
or indirect 10% or greater shareholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended.
However, 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 Security 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 Security 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.

Under current law, a Security will not be includible in the estate of a non-
U.S. Holder unless the individual is a direct or indirect 10% or greater
shareholder of the Company or, at the time of such individual's death,
payments in respect of such Security would have been effectively connected
with the conduct by such individual of a trade or business in the United
States.

S-31
<PAGE>

BACKUP WITHHOLDING

Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Securities 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 Securities 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 Security to (or through) a broker, the
broker must withhold 31% of the entire purchase price, unless either (i) the
broker determines that the seller is a corporation or other exempt recipient
or (ii) the seller provides, in the required manner, certain identifying
information and, in the case of a non-U.S. Holder, certifies that such seller
is a non-U.S. Holder (and certain other conditions are met). Such a sale must
also be reported by the broker to the IRS, unless either (i) the broker
determines that the seller is an exempt recipient or (ii) the seller certifies
its non-U.S. status (and certain other conditions are met). Certification of
the registered owner's non-U.S. status would be made normally on an IRS Form
W-8 under penalties of perjury, although in certain cases it may be possible
to submit other documentary evidence.

Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States Federal income tax provided the required
information is furnished to the IRS.

USE OF PROCEEDS

The net proceeds from the sale of the Securities will be used as described
under "Use of Proceeds" in the attached Prospectus and to hedge market risks
of the Company affecting the value of the Supplemental Redemption Amount.

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 $25,000,000 aggregate
principal amount of Securities. 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 Securities if
any are purchased.

The Underwriter has advised the Company that it proposes initially to offer
all or part of the Securities directly to the public at the offering prices
set forth on the cover page of this Prospectus Supplement and to certain
dealers at such prices less a concession not in excess of % of the principal
amount of the Securities. After the initial public offering, the public
offering price and concession may be changed.

The underwriting of the Securities will conform to the requirements set
forth in the applicable sections of Rule 2720 of the Conduct Rules of the
National Association of Securities Dealers, Inc.

VALIDITY OF SECURITIES

The validity of the Securities will be passed upon for the Company and for
the Underwriter by Brown & Wood LLP, New York, New York.

S-32
<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 $2,183,478,981 aggregate principal amount (or net proceeds in the case of
warrants and in the case of securities issued at an original issue discount),
or its equivalent in such foreign currencies or units of two or more
currencies, based on the applicable exchange rate at the time of offering, as
shall be designated by the Company at the time of offering, of its senior debt
securities ("Senior Debt Securities"), subordinated debt securities
("Subordinated Debt Securities" and, together with the Senior Debt Securities,
the "Debt Securities"), warrants to purchase Debt Securities ("Debt Warrants"),
warrants entitling the holders thereof to receive from the Company a payment or
delivery determined by reference to decreases or increases in the level of an
index or portfolio based on one or more equity or debt securities (including
the price or yield of such securities), any statistical measure of economic or
financial performance (including any consumer price, currency or mortgage
index) or the price or value of any commodity or a combination thereof (the
"Index Warrants") and warrants to receive from the Company the cash value in
U.S. dollars of the right to purchase ("Currency Call Warrants") or to sell
("Currency Put Warrants" and, together with the Currency Call Warrants, the
"Currency Warrants") such foreign currencies or units of two or more currencies
as shall be designated by the Company at the time of offering. The Debt
Securities, Debt Warrants, Index Warrants and Currency Warrants, which are
collectively called the "Securities", may be offered either jointly or
separately and will be offered to the public on terms determined by market
conditions at the time of sale and set forth in a prospectus supplement.

The Securities will be unsecured and, except in the case of Subordinated Debt
Securities, will rank equally with all other unsecured and unsubordinated
indebtedness of the Company. The Subordinated Debt Securities will be
subordinated to all existing and future Senior Indebtedness of the Company.

Each issue of Securities may vary, where applicable, as to aggregate
principal amount, maturity date, public offering or purchase price, interest
rate or rates, if any, and timing of payments thereof, provision for
redemption, sinking fund requirements, if any, exercise provisions, currencies
of denomination or currencies otherwise applicable thereto and any other
variable terms and method of distribution. The accompanying Prospectus
Supplement (the "Prospectus Supplement") sets forth the specific terms with
regard to the Securities in respect of which this Prospectus is being
delivered. The Company may elect to deliver to purchasers of Securities an
abbreviated term sheet setting forth a description of the Securities being
offered, or a summary thereof (a "Terms Sheet"), instead of a Prospectus
Supplement. This Prospectus may be delivered prior to or concurrently with a
Terms Sheet.

----------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

----------------

The Securities may be sold directly or through Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") as agent or may be
offered and reoffered through, or through underwriting syndicates managed or
co-managed by, one or more of the following: MLPF&S; Bear, Stearns & Co. Inc.;
Donaldson, Lufkin & Jenrette Securities Corporation; CS First Boston
Corporation; Goldman, Sachs & Co.; Lehman Brothers Inc.; Morgan Stanley & Co.
Incorporated; Nomura Securities International, Inc.; PaineWebber Incorporated;
and Salomon Brothers Inc, or directly to purchasers by the Company. The Company
has entered into agreements with such firms with respect to the Securities
providing for agency sales of the Securities through MLPF&S or the purchase and
offering from time to time by one or more of such firms, either alone or with
the several members of any syndicate formed by them. Additional agreements
respecting the distribution of the Securities may be entered into from time to
time by the Company. Securities may not be sold without delivery of a
Prospectus Supplement describing such issue of Securities and the method and
terms of offering thereof or of a Terms Sheet.

----------------

The date of this Prospectus is August 30, 1996.
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy and information statements and
other information filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and Northeast Regional Office, Seven
World Trade Center, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports, proxy and
information statements and other information concerning the Company may also be
inspected at the offices of the New York Stock Exchange, the American Stock
Exchange, the Chicago Stock Exchange and the Pacific Stock Exchange. The
Commission maintains a Web site at http://www.sec.gov containing reports, proxy
and information statements and other information regarding registrants,
including the Company, that file electronically with the Commission.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The Company's Annual Report on Form 10-K for the year ended December 29,
1995, Quarterly Reports on Form 10-Q for the periods ended March 29, 1996 and
June 28, 1996, and Current Reports on Form 8-K dated January 17, 1996, January
22, 1996, February 7, 1996, February 29, 1996, March 1, 1996, March 12, 1996,
March 18, 1996, April 1, 1996, April 15, 1996, May 1, 1996, May 13, 1996, May
15, 1996, May 28, 1996 (as amended by Form 8-K/A filed June 7, 1996), July 9,
1996, July 16, 1996, July 31, 1996 and August 12, 1996 filed pursuant to
Section 13 of the Exchange Act, are hereby incorporated by reference into this
Prospectus.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the Securities shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.

THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
(WITHOUT EXHIBITS OTHER THAN EXHIBITS SPECIFICALLY INCORPORATED BY REFERENCE)
OF ANY OR ALL DOCUMENTS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. GREGORY T. RUSSO, SECRETARY,
MERRILL LYNCH & CO., INC., 100 CHURCH STREET, 12TH FLOOR, NEW YORK, NEW YORK
10080-6512; TELEPHONE NUMBER (212) 602-8435.

2
<PAGE>

MERRILL LYNCH & CO., INC.

Merrill Lynch & Co., Inc. is a holding company that, through its subsidiaries
and affiliates, provides investment, financing, insurance, and related services
on a global basis. Its principal subsidiary, MLPF&S, one of the largest
securities firms in the world, is a leading broker in securities, options
contracts, and commodity and financial futures contracts; a leading dealer in
options and in corporate and municipal securities; a leading investment banking
firm that provides advice to, and raises capital for, its clients; and an
underwriter of selected insurance products. Other subsidiaries provide
financial services on a global basis similar to those of MLPF&S and are engaged
in such other activities as international banking, lending, and providing other
investment and financing services. Merrill Lynch International Incorporated,
through subsidiaries and affiliates, provides investment, financing, and
related services outside the United States and Canada. Merrill Lynch Asset
Management, LP and Fund Asset Management, LP together constitute one of the
largest mutual fund managers in the world and provide investment advisory
services. Merrill Lynch Government Securities Inc. is a primary dealer in
obligations issued or guaranteed by the U.S. Government and its agencies.
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. 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

<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN DECEMBER
---------------------------------------------
1991 1992 1993 1994 1995
------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
Revenues..................... $12,353 $ 13,413 $ 16,588 $ 18,234 $ 21,513
Net revenues................. $ 7,246 $ 8,577 $ 10,558 $ 9,625 $ 10,265
Earnings before income taxes
and cumulative effect of
changes in accounting
principles(1)............... $ 1,017 $ 1,621 $ 2,425 $ 1,730 $ 1,811
Cumulative effect of changes
in accounting principles
(net of applicable income
taxes)(1)................... -- $ (58) $ (35) -- --
Net earnings(1).............. $ 696 $ 894 $ 1,359 $ 1,017 $ 1,114
Ratio of earnings to fixed
charges(2).................. 1.2 1.3 1.4 1.2 1.2
Total assets(3).............. $86,259 $107,024 $152,910 $163,749 $176,857
Long-term borrowings(4)...... $ 7,964 $ 10,871 $ 13,469 $ 14,863 $ 17,340
Stockholders' equity......... $ 3,818 $ 4,569 $ 5,486 $ 5,818 $ 6,141
</TABLE>
- --------
(1) Net earnings for 1992 have been reduced by $58 million 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 have been
reduced by $35 million 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,
amortization of debt expense, preferred stock dividend requirements of
majority-owned subsidiaries, and that portion of rentals estimated to be
representative of the interest factor.
(3) In 1994, the Company adopted Financial Accounting Standards Board
("FASB") Interpretation No. 39, "Offsetting of Amounts Related to Certain
Contracts", and FASB Interpretation No. 41, "Offsetting of Amounts Related
to Certain Repurchase and Reverse Repurchase Agreements", which increased
assets and liabilities at December 30, 1994 by approximately $8,500
million.
(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 varies significantly
with the level of general business activity, on December 29, 1995, $1,022
million of bank loans and $16,969 million 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 29, 1995, cash deposits for securities loaned and securities sold
under agreements to repurchase amounted to $2,857 million and $56,817
million, respectively.

FISCAL YEAR 1995

Global financial markets, which steadily weakened during most of 1994,
generally improved during 1995, led by a more stable U.S. economy, declining
interest rates, and heightened investor activity. Inflationary fears eased
throughout 1995 as key U.S. economic statistics indicated slow to moderate
growth. The Federal Reserve decreased short-term interest rates in July and
December 1995 following seven rate increases between

4
<PAGE>

February 1994 and February 1995. Investors reacted favorably to these events
and were more active in stock and bond markets during 1995. Net earnings for
the 1995 fourth quarter were $303 million, up 1% from the 1995 third quarter
and up 88% from the 1994 fourth quarter.

Net earnings for 1995 were $1,114 million, up 10% from 1994 net earnings of
$1,017 million. Earnings per common share were $5.44 primary and $5.42 fully
diluted in 1995, compared with $4.75 primary and $4.74 fully diluted in 1994.

Total revenues were a record $21,513 million, up 18% from 1994. Net revenues
(revenues after interest expense) totaled $10,265 million in 1995, up 7% from
1994.

Commission revenues increased 9% to a record $3,126 million from $2,871
million in 1994, due primarily to higher levels of listed and over-the-counter
securities transactions and mutual fund commissions, partially offset by lower
revenues from commodities. Commissions from listed and over-the-counter
securities increased due primarily to higher trading volumes on most major U.S.
and international exchanges. Mutual fund commissions increased due primarily to
higher distribution and redemption fees. Distribution fees from deferred-charge
funds increased due to strong fund sales in prior periods and higher asset
levels. Redemption fees increased as clients repositioned invested assets.

Interest and dividend revenues increased 28% to $12,221 million from $9,578
million in 1994. Interest expense, which includes dividend expense, increased
31% from 1994 to $11,248 million. Net interest and dividend profit was $973
million, virtually unchanged from $969 million in 1994, with increases in net
interest-earning assets offset by declining interest spreads due to the
flattening of the U.S. Treasury yield curve. The change in the yield curve
resulted from long-term interest rates falling more than short-term rates
during 1995.

Principal transactions revenues increased 8% from 1994 to $2,519 million in
1995. Increases in equities and equity derivatives and taxable fixed-income
trading revenues were partially offset by decreases in trading revenues from
municipal securities, foreign exchange and commodities, and interest rate and
currency swaps. Equities and equity derivatives trading revenues, in the
aggregate, increased 46% to $912 million, due primarily to improved volumes in
the convertible, over-the-counter, and international equities markets,
partially offset by lower equity derivatives trading revenues. Taxable fixed-
income trading revenues increased 10% to $516 million due, in part, to higher
revenues from corporate bonds and preferred stock, high-yield bonds, and non-
U.S. governments and agencies securities. Trading revenues from mortgage-backed
products were negatively affected by reduced market liquidity, leading to a
loss. Nevertheless, trading results from mortgage-backed products, which
include related net interest revenues, were positive. U.S. Government and
agencies securities trading revenues were down from 1994 due to tighter spreads
between U.S. Treasury securities and related futures hedges, as well as reduced
retail investor demand attributable to lower interest rates. Municipal
securities revenues decreased 28% to $273 million as a result of decreased
investor demand for tax-exempt investments as investors remained wary of
potential tax law changes and sought higher returns in equity and taxable
fixed-income securities. Foreign exchange and commodities revenues, in the
aggregate, declined 22% to $86 million. Commodities trading revenues decreased
due to lower volumes. Increases in foreign exchange trading revenues resulted
from higher customer volume caused by the strengthening of the U.S. dollar
versus other major currencies during 1995. Interest rate and currency swaps
revenues declined 2% to $732 million. Decreases in U.S. dollar-denominated
transactions were substantially offset by increased revenues in non-dollar-
denominated transactions, particularly in Japanese and European markets.

Investment banking revenues were $1,308 million, up 5% from $1,240 million in
1994. Strategic services revenues, which include fees for merger and
acquisition activity, debt restructuring, and other advisory services,
increased, as companies worldwide sought strategic partners to promote growth
while cutting costs and increasing efficiencies. Underwriting revenues were
down, as lower revenues from equities, private placements, high-yield debt, and
mortgage-backed securities underwriting were partially offset by increased
underwriting revenues from corporate bonds and preferred stock and defined
asset funds.

5
<PAGE>

Asset management and portfolio service fees rose 9% in 1995 to a record
$1,890 million from $1,739 million in 1994, as a result of higher fees earned
from asset management and other fee-based services. Other revenues decreased 5%
from 1994 to $449 million, due to lower net realized investment gains in 1995
compared with 1994.

Non-interest expenses were $8,454 million, up 7% from $7,895 million in the
year-ago period. Compensation and benefits expense, which represented
approximately 62% of non-interest expenses, increased 6% due primarily to
increased production-related and incentive compensation and the addition of
Smith New Court PLC ("Smith New Court") employees. Compensation and benefits
expense as a percentage of net revenues was 51.3% in 1995, compared with 51.5%
in 1994.

Occupancy costs increased 3% from 1994 primarily due to international growth.
Other facilities-related costs, which include communications and equipment
rental expense and depreciation and amortization expenses, rose 13% primarily
due to expanded use of market data services, as well as higher depreciation
expense from the purchase of technology-related assets over the past year.

Professional fees increased 16% from the year-ago period, due to higher legal
fees and systems development costs related to upgrading technology and
processing capabilities in customer, trading, and transaction processing
systems. Advertising and market development expenses increased 6% from 1994 as
a result of increased advertising, international travel, and sales promotion
primarily related to international growth. Brokerage, clearing, and exchange
fees increased 7% as a result of higher securities volume, particularly in
international markets. Other expenses increased 4% from 1994, due primarily to
a $26 million first quarter charge for the write-off of assets related to a
technology contract and $14 million of goodwill amortization related to Smith
New Court.

Income tax expense totaled $697 million in 1995. The effective tax rate in
1995 was 38.5%, compared with 41.2% in 1994. The decrease in the effective tax
rate was attributable to lower state income taxes, expanded international
business activities in jurisdictions with lower tax rates, and increases in
deductions for dividends received.

In 1995 the Company acquired Smith New Court, a U.K.-based global securities
firm, for approximately $800 million. The Company recorded approximately $530
million of goodwill related to the acquisition, which is being amortized on a
straight-line basis over 15 years. The Company's 1995 results include those of
Smith New Court since mid-August 1995.

CERTAIN BALANCE SHEET INFORMATION AS OF DECEMBER 29, 1995

The Company believes that its equity base is adequate relative to the level
and composition of its assets and the mix of its business.

In the normal course of business, the Company underwrites, trades, and holds
non-investment grade securities in connection with its investment banking,
market-making, and derivative structuring activities. These activities are
subject to risks related to the creditworthiness of the issuers of, and the
liquidity of the market for, such securities, in addition to the usual risks
associated with investing in, financing, underwriting, and trading in
investment grade instruments.

At December 29, 1995, the fair value of long and short non-investment grade
trading inventories amounted to $5,489 million and $353 million, respectively,
and in the aggregate (i.e. the sum of long and short trading inventories)
represented 6.3% of aggregate consolidated trading inventories.

At December 29, 1995, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $489 million
(excluding unutilized revolving lines of credit and other lending commitments
of $127 million), consisting primarily of senior term and subordinated
financings to 30

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medium-sized corporations. At December 29, 1995, the Company had no bridge
loans outstanding. Loans to highly leveraged corporations are carried at unpaid
principal balances less a reserve for estimated losses. The allowance for loan
losses is estimated based on a review of each loan, and consideration of
economic, market, and credit conditions. Direct equity investments made in
conjunction with the Company's investment and merchant banking activities
aggregated $211 million at December 29, 1995, representing investments in 62
enterprises. Equity investments in privately-held companies for which sale is
restricted by government or contractual requirements are carried at the lower
of cost or estimated net realizable value. At December 29, 1995, the Company
held interests in partnerships, totaling $91 million (recorded on the cost
basis), that invest in highly leveraged transactions and non-investment grade
securities. At December 29, 1995, the Company also committed to invest an
additional $79 million in partnerships that invest in leveraged transactions.

The Company's insurance subsidiaries hold non-investment grade securities.
Non-investment grade securities were 4.2% of total insurance investments at
December 29, 1995. Non-investment grade securities of insurance subsidiaries
are classified as available-for-sale and are carried at fair value.

At December 29, 1995, the largest non-investment grade concentration
consisted of various issues of a South American sovereign totaling $674
million, of which $672 million represented on-balance-sheet hedges for off-
balance-sheet financial instruments. No one industry sector accounted for more
than 35% of total non-investment grade positions. At December 29, 1995, the
Company held an aggregate carrying value of $164 million in debt and equity
securities of issuers in various stages of bankruptcy proceedings or in
default, of which 75% resulted from the Company's market-making activities in
such securities.

DESCRIPTION OF DEBT SECURITIES

Unless otherwise specified in a Prospectus Supplement, the Senior Debt
Securities are to be issued under an indenture (the "1983 Indenture"), dated as
of April 1, 1983, as amended and restated, between the Company and The Chase
Manhattan Bank, formerly known as Chemical Bank (successor by merger to
Manufacturers Hanover Trust Company), as trustee or issued under an indenture
(the "1993 Indenture"), dated as of October 1, 1993 between the Company and The
Chase Manhattan Bank (successor by merger to The Chase Manhattan Bank, N.A.),
as trustee (each, a "Senior Debt Trustee"). The 1983 Indenture and the 1993
Indenture are referred to herein as the "Senior Indentures". The Subordinated
Debt Securities are to be issued under an indenture (the "Subordinated
Indenture"), between the Company and The Chase Manhattan Bank, formerly known
as Chemical Bank, as trustee (the "Subordinated Debt Trustee"). The Senior Debt
Securities and Subordinated Debt Securities may also be issued under one or
more other indentures (each, a "Subsequent Indenture") and have one or more
other trustees (each, a "Subsequent Trustee"). Any Subsequent Indenture
relating to Senior Debt Securities will have terms and conditions identical in
all material respects to the above-referenced Senior Indentures and any
Subsequent Indenture relating to Subordinated Debt Securities will have terms
and conditions identical in all material respects to the above-referenced
Subordinated Indenture, including, but not limited to, the applicable terms and
conditions described below. Any Subsequent Indenture relating to a series of
Debt Securities, and the trustee with respect thereto, will be identified in
the applicable Prospectus Supplement. The Senior Indentures, the Subordinated
Indenture and any Subsequent Indentures (whether senior or subordinated) are
referred to herein as the "Indentures"; and the Senior Debt Trustees, the
Subordinated Debt Trustee and any Subsequent Trustees are referred to herein as
the "Trustees". A copy of each Indenture is filed (or, in the case of a
Subsequent Indenture, will be filed) as an exhibit to the registration
statements relating to the Securities (collectively, the "Registration
Statement"). The following summaries of certain provisions of the Indentures do
not purport to be complete and are subject to, and are qualified in their
entirety by reference to, all provisions of the respective Indentures,
including the definitions therein of certain terms.

GENERAL

Each Indenture provides that Debt Securities (Senior Debt Securities in the
case of the Senior Indentures or a Subsequent Indenture for Senior Debt
Securities, and Subordinated Debt Securities in the case of the

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<PAGE>

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 the Prospectus Supplement for the terms of
the Debt Securities being offered thereby, including whether such Debt
Securities are Senior Debt Securities or Subordinated Debt Securities. The
Company may elect to deliver to purchasers of Securities a Terms Sheet instead
of a Prospectus. This Prospectus may be delivered prior to or concurrently
with a Terms Sheet. Debt Securities may also be issued under the Indentures
upon the exercise of Debt Warrants. See "Description of Debt Warrants".
Nothing in the Indentures or in the terms of the Debt Securities will prohibit
the issuance of securities representing subordinated indebtedness that is
senior or junior to the Subordinated Debt Securities.

The Debt Securities will be issued, to the extent provided in the Prospectus
Supplement, in fully registered form without coupons, and/or in bearer form
with or without coupons, and in denominations set forth in the Prospectus
Supplement. No service charge will be made for any registration of transfer of
registered Debt Securities or exchange of Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charges that may be imposed in connection therewith. Each Indenture provides
that Debt Securities issued thereunder may be issued in global form. If any
series of Debt Securities is issuable in global form, the applicable
Prospectus Supplement will describe the circumstances, if any, under which
beneficial owners of interest in any such global Debt Securities may exchange
such interests for Debt Securities of such series and of like tenor and
principal amount in any authorized form and denomination. Principal of, and
any premium, Additional Amounts and interest on, a global Debt Security will
be payable in the manner described in the applicable Prospectus Supplement.

The provisions of the Indentures described above provide the Company with
the ability, in addition to the ability to issue Debt Securities with terms
different from those of Debt Securities previously issued, to "reopen" a
previous issue of a series of Debt Securities and issue additional Debt
Securities of such series.

The Senior Debt Securities will be unsecured and will rank pari passu with
all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Debt Securities will be unsecured and will be subordinated to all
existing and future Senior Indebtedness (as defined below) of the Company.
Since the Company is a holding company, the right of the Company, and hence
the right of creditors of the Company (including the Holders of the Debt
Securities), to participate in any distribution of the assets of any
subsidiary upon its liquidation or reorganization or otherwise is necessarily
subject to the prior claims of creditors of

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<PAGE>

the subsidiary, except to the extent that claims of the Company itself as a
creditor of the subsidiary may be recognized. In addition, dividends, loans and
advances from certain subsidiaries, including MLPF&S, to the Company are
restricted by net capital requirements under the Securities Exchange Act of
1934 and under rules of certain exchanges and other regulatory bodies.

Principal and any interest, premium and Additional Amounts will be payable in
the manner, at the places and subject to the restrictions set forth in the
applicable Indenture, the Debt Securities and the Prospectus Supplement
relating thereto, provided that payment of any interest and any Additional
Amounts may be made at the option of the Company by check mailed to the holders
of registered Debt Securities at their registered addresses.

Debt Securities may be presented for exchange, and registered Debt Securities
may be presented for transfer, in the manner, at the places and subject to the
restrictions set forth in the applicable Indenture, the Debt Securities and the
Prospectus Supplement relating thereto. Debt Securities in bearer form and the
coupons, if any, pertaining thereto will be transferable by delivery. No
service charge will be made for any transfer or exchange of Debt Securities,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.

"MERGER AND CONSOLIDATION"

The Company may consolidate or merge with or into any other corporation, and
the Company may sell, lease or convey all or substantially all of its assets to
any corporation, provided that (i) the corporation (if other than the Company)
formed by or resulting from any such consolidation or merger or which shall
have received such assets shall be a corporation organized and existing under
the laws of the United States of America or a state thereof and shall assume
payment of the principal of, and any premium, Additional Amounts or interest
on, the Debt Securities and the performance and observance of all of the
covenants and conditions of the Indentures to be performed or observed by the
Company, and (ii) the Company or such successor corporation, as the case may
be, shall not immediately thereafter be in default under the Indentures.

"MODIFICATION AND WAIVER"

Modification and amendment of each Indenture may be effected by the Company
and the applicable Trustee with the consent of the Holders of at least 66 2/3%
in principal amount of the Outstanding Debt Securities of each series issued
pursuant to such Indenture and affected thereby, provided that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby, (a) change the Stated Maturity of,
or any installment of interest or Additional Amounts on, any Debt Security or
any premium payable on the redemption thereof, or change the Redemption Price;
(b) reduce the principal amount of, or the interest or Additional Amounts
payable on, any Debt Security or reduce the amount of principal which could be
declared due and payable prior to the Stated Maturity; (c) change the place or
currency of any payment of principal of, or any premium, interest or Additional
Amounts on, any Debt Security; (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security; (e) reduce
the percentage in principal amount of the Outstanding Debt Securities of any
series, the consent of whose Holders is required to modify or amend such
Indenture; or (f) modify the foregoing requirements or reduce the percentage of
Outstanding Debt Securities necessary to waive any past default to less than a
majority. No modification or amendment of the Subordinated Indenture or any
Subsequent Indenture for Subordinated Debt Securities may adversely affect the
rights of any Holder of Senior Indebtedness without the consent of such Holder.
Except with respect to certain fundamental provisions, the Holders of at least
a majority in principal amount of Outstanding Debt Securities of any series
may, with respect to such series, waive past defaults under the applicable
Indenture and waive compliance by the Company with certain provisions of such
Indenture.

"EVENTS OF DEFAULT"

Under each Indenture, the following will be Events of Default with respect to
Debt Securities of any series issued thereunder: (a) default in the payment of
any interest or Additional Amounts upon any Debt

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<PAGE>

Security of that series when due, and such default has continued for 30 days;
(b) default in the payment of any principal of or premium, if any, on any Debt
Security of that series when due; (c) default in the deposit of any sinking
fund payment, when due, in respect of any Debt Security of that series; (d)
default in the performance of any other covenant of the Company contained in
such Indenture for the benefit of such series or in the Debt Securities of such
series, and such default has continued for 60 days after written notice as
provided in such Indenture; (e) certain events in bankruptcy, insolvency or
reorganization; and (f) any other Event of Default provided with respect to
Debt Securities of that series. The applicable Trustee or the Holders of 25% in
principal amount of the Outstanding Debt Securities of that series may declare
the principal amount (or such lesser amount as may be provided for in the Debt
Securities of that series) of all Outstanding Debt Securities of that series
and the interest accrued thereon and Additional Amounts payable in respect
thereof, if any, to be due and payable immediately if an Event of Default with
respect to Debt Securities of such series shall occur and be continuing at the
time of declaration. At any time after a declaration of acceleration has been
made with respect to Debt Securities of any series but before a judgment or
decree for payment of money due has been obtained by the applicable Trustee,
the Holders of a majority in principal amount of the Outstanding Debt
Securities of that series may rescind any declaration of acceleration and its
consequences, provided that all payments due (other than those due as a result
of acceleration) have been made and all Events of Default have been remedied or
waived. Any Event of Default with respect to Debt Securities of any series may
be waived by the Holders of a majority in principal amount of all Outstanding
Debt Securities of that series, except in a case of failure to pay principal of
or premium, if any, or interest or Additional Amounts, if any, on any Debt
Security of that series for which payment had not been subsequently made or in
respect of a covenant or provision which cannot be modified or amended without
the consent of the Holder of each Outstanding Debt Security of such series
affected.

The Holders of a majority in principal amount of the Outstanding Debt
Securities of a series may direct the time, method and place of conducting any
proceeding for any remedy available to the applicable Trustee or exercising any
trust or power conferred on such Trustee with respect to Debt Securities of
such series, provided that such direction shall not be in conflict with any
rule of law or the applicable Indenture. Subject to the provisions of each
Indenture relating to the duties of the appropriate Trustee, before proceeding
to exercise any right or power under an Indenture at the direction of such
Holders, the applicable Trustee shall be entitled to receive from such Holders
reasonable security or indemnity against the costs, expenses and liabilities
which might be incurred by it in complying with any such direction.

The Company will be required to furnish to each Trustee annually a statement
as to the fulfillment by the Company of all of its obligations under the
applicable Indenture.

SPECIAL TERMS RELATING TO THE SENIOR DEBT SECURITIES

"LIMITATIONS UPON LIENS"

The Senior Indentures provide that the Company may not, and may not permit
any Subsidiary to, create, assume, incur or permit to exist any indebtedness
for borrowed money secured by a pledge, lien or other encumbrance (except for
certain liens specifically permitted by the Senior Indentures) on the Voting
Stock owned directly or indirectly by the Company of any Subsidiary (other than
a Subsidiary which, at the time of incurrence of such secured indebtedness, has
a net worth of less than $3,000,000) without making effective provision whereby
the Outstanding Senior Debt Securities will be secured equally and ratably with
such secured indebtedness.

"LIMITATIONS ON DISPOSITION OF VOTING STOCK OF, AND MERGER AND SALE OF ASSETS
BY, MLPF&S"

The Senior Indentures provide that the Company may not sell, transfer or
otherwise dispose of any Voting Stock of MLPF&S or permit MLPF&S to issue, sell
or otherwise dispose of any of its Voting Stock, unless, after giving effect to
any such transaction, MLPF&S remains a Controlled Subsidiary (defined in the
Senior Indentures to mean a corporation more than 80% of the outstanding shares
of Voting Stock of which

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<PAGE>

are owned directly or indirectly by the Company). In addition, the Senior
Indentures provide that the Company may not permit MLPF&S to (i) merge or
consolidate, unless the surviving company is a Controlled Subsidiary, or (ii)
convey or transfer its properties and assets substantially as an entirety,
except to one or more Controlled Subsidiaries.

SPECIAL TERMS RELATING TO THE SUBORDINATED DEBT SECURITIES

Upon any distribution of assets of the Company resulting from any
dissolution, winding up, liquidation or reorganization, payments on
Subordinated Debt Securities are to be subordinated to the extent provided in
the Subordinated Indenture in right of payment to the prior payment in full of
all Senior Indebtedness, but the obligation of the Company to make payments on
the Subordinated Debt Securities will not otherwise be affected. No payment on
Subordinated Debt Securities may be made at any time when there is a default in
the payment of any principal, premium, interest, Additional Amounts, if any, or
sinking fund of or on any Senior Indebtedness. Holders of Subordinated Debt
Securities will be subrogated to the rights of holders of Senior Indebtedness
to the extent of payments made on Senior Indebtedness upon any distribution of
assets in any such proceedings out of the distributive shares of Subordinated
Debt Securities. By reason of such subordination, in the event of a
distribution of assets upon insolvency, certain creditors of the Company may
recover more, ratably, than Holders of Subordinated Debt Securities.

Senior Indebtedness is defined in the Subordinated Indenture as the principal
of, premium, if any, and unpaid interest on (a) indebtedness of the Company
(including indebtedness of others guaranteed by the Company), other than the
Subordinated Debt Securities, whether outstanding on the date of execution of
the Subordinated Indenture or thereafter created, incurred, assumed or
guaranteed, (i) for money owing to banks, (ii) for money borrowed from sources
other than banks or (iii) in connection with the acquisition by the Company or
a subsidiary of assets of any kind except in the ordinary course of business,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such indebtedness is not superior
in right of payment to the Subordinated Debt Securities, and (b) renewals,
extensions, modifications and refundings of any such indebtedness. As of June
28, 1996, a total of approximately $45.2 billion of the Company's indebtedness
would have been Senior Indebtedness as so defined.

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

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<PAGE>

exercise of such Debt Warrants, including whether such Debt Securities are
Senior Debt Securities or Subordinated Debt Securities, and the procedures and
conditions relating to the exercise of such Debt Warrants; (2) the designation
and terms of any related Debt Securities with which such Debt Warrants are
issued, including whether such Debt Securities are Senior Debt Securities or
Subordinated Debt Securities, the number of such Debt Warrants issued with each
such Debt Security, and the Indenture under which the Debt Securities will be
issued; (3) the date, if any, on and after which such Debt Warrants and the
related Debt Securities will be separately transferable; (4) the date on which
the right to exercise such Debt Warrants shall commence and the date on which
such right shall expire (the "Expiration Date"); (5) if the Debt Securities
purchasable upon exercise of such Debt Warrants are original issue discount
Debt Securities, a discussion of Federal income tax considerations applicable
thereto; and (6) whether the Debt Warrants represented by the Debt Warrant
Certificates will be issued in registered or bearer form, and, if registered,
where they may be transferred and registered.

Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations and Debt Warrants may be exercised at
the corporate trust office of the Debt Warrant Agent or any other office
indicated in the Prospectus Supplement. Prior to the exercise of their Debt
Warrants, holders of Debt Warrants will not have any of the rights of Holders
of the Debt Securities purchasable upon such exercise and will not be entitled
to payments of principal of, and any premium, Additional Amounts, if any, or
interest on, the Debt Securities purchasable upon such exercise.

EXERCISE OF DEBT WARRANTS

Each Debt Warrant will entitle the Holder to purchase for cash such principal
amount of Debt Securities at such exercise price as shall in each case be set
forth in, or be determinable as set forth in, the Prospectus Supplement
relating to the Debt Warrants offered thereby. Debt Warrants may be exercised
at any time up to the close of business on the Expiration Date set forth in the
Prospectus Supplement relating to the Debt Warrants offered thereby. After the
close of business on the Expiration Date, unexercised Debt Warrants will become
void.

Debt Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Debt Warrants offered thereby. Upon receipt of payment and the
Debt Warrant Certificate properly completed and duly executed at the corporate
trust office of the Debt Warrant Agent or any other office indicated in the
Prospectus Supplement, the Company will, as soon as practicable, forward the
Debt Securities purchasable upon such exercise. If less than all of the Debt
Warrants represented by such Debt Warrant Certificate are exercised, a new Debt
Warrant Certificate will be issued for the remaining amount of Debt Warrants.

DESCRIPTION OF CURRENCY WARRANTS

The Company may issue, together with Debt Securities, Debt Warrants or Index
Warrants or separately, Currency Warrants either in the form of Currency Put
Warrants entitling the Holders thereof to receive from the Company the cash
settlement value in U.S. dollars of the right to sell a specified amount of a
specified foreign currency or currency units for a specified amount of U.S.
dollars, or in the form of Currency Call Warrants entitling the Holders thereof
to receive from the Company the cash settlement value in U.S. dollars of the
right to purchase a specified amount of a specified foreign currency or units
of two or more currencies for a specified amount of U.S. dollars. The Currency
Warrants are to be issued under a currency put warrant agreement or a currency
call warrant agreement, as applicable (each a "Currency Warrant Agreement"), to
be entered into between the Company and a bank or trust company, as currency
warrant agent (the "Currency Warrant Agent"), all as shall be set forth in the
applicable Prospectus Supplement. Copies of the forms of Currency Put Warrant
Agreement and Currency Call Warrant Agreement, including the forms of warrant
certificates representing the Currency Put Warrants and Currency Call Warrants
(the "Currency Warrant Certificates"), reflecting the provisions to be included
in the Currency Warrant Agreements that will be entered into with respect to
particular offerings of Currency Warrants, are filed as exhibits to the

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<PAGE>

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.

LISTING

Each issue of Currency Warrants will be listed on a national securities
exchange, subject only to official notice of issuance, as a condition of sale
of any such Currency Warrants. In the event that the Currency Warrants are
delisted from, or permanently suspended from trading on, such exchange, the
Expiration Date for such Currency Warrants will be the date such delisting or
trading suspension becomes effective and Currency Warrants not previously
exercised will be deemed automatically exercised on the business day
immediately preceding such Expiration Date. The applicable Currency Warrant
Agreement will contain a covenant of the Company not to seek delisting of the
Currency Warrants, or suspension of their trading, on such exchange.

DESCRIPTION OF INDEX WARRANTS

The Company may issue from time to time Index Warrants consisting of put
warrants (the "Index Put Warrants") or call warrants (the "Index Call
Warrants"). The Index Warrants will entitle the holders to receive from the
Company a payment or delivery, subject to applicable law, determined by
reference to decreases (in the case of Index Put Warrants) or to increases (in
the case of Index Call Warrants) in the level

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<PAGE>

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 its
publisher; (xv) the time or times at which payment or delivery, if any, will be
made in respect of such Index Warrants following exercise or deemed exercise;
(xvi) the self-regulatory organization on which such Index Warrants will be
traded, if any; (xvii) any provisions for issuing such Index Warrants in other
than book-entry form; (xviii) if such Index Warrants are not issued in book-
entry form, the place or places at which payment or delivery on cancellation,
if any, and the Minimum Expiration Value, if any, of such Index Warrants is to
be made by the Company; (xix) certain U.S. federal income tax consequences
relating to such Index Warrants; and (xx) other specific provisions.

Except as otherwise provided in the applicable Prospectus Supplement, each
issue of Index Warrants will contain the terms set forth below.

The Index Warrants which are issued without a Minimum Expiration Value will
be issued under one or more index warrant agreements (each, an "Index Warrant
Agreement") to be entered into between the Company and a bank or trust company,
as warrant agent (the "Index Warrant Agent"), all as described in the
Prospectus Supplement relating to such Index Warrants. The Index Warrant Agent
will act solely as the

14
<PAGE>

agent of the Company under the applicable Index Warrant Agreement and will not
assume any obligation or relationship of agency or trust for or with any Index
Warrantholders. A single bank or trust company may act as Index Warrant Agent
for more than one issue of Index Warrants.

The Index Warrants which are issued with a Minimum Expiration Value will be
issued under one or more index warrant trust indentures (each an "Index Warrant
Trust Indenture") to be entered into between the Company and a corporation (or
other person permitted to so act by the Trust Indenture Act of 1939, as amended
from time to time (the "Trust Indenture Act")), to act as trustee (the "Index
Warrant Trustee"), all as described in the Prospectus Supplement relative to
such Index Warrants. Any Index Warrant Trust Indenture will be qualified under
the Trust Indenture Act. To the extent allowed by the Trust Indenture Act, a
single qualified corporation may act as Index Warrant Trustee for more than one
issue of Index Warrants.

Forms of Index Warrant Agreement and Index Warrant Trust Indenture and the
respective global index warrant certificates related thereto are filed as
exhibits to the Registration Statement. The summaries herein of certain
provisions of the Index Warrant Agreement, the Index Warrant Trust Indenture
and global index warrant certificates do not purport to be complete and are
subject to, and are qualified in their entirety by reference to, all the
provisions of the Index Warrant Agreement, the Index Warrant Trust Indenture
and global index warrant certificates, respectively.

The Company will have the right to "reopen" a previous issue of Index
Warrants and to issue additional Index Warrants of such issue without the
consent of any Index Warrantholder.

The Index Warrants involve a high degree of risk, including the risk that the
Index Warrants will expire worthless except for the Minimum Expiration Value,
if any, of such Index Warrants. Investors should therefore be prepared to
sustain a total loss of the purchase price of the Index Warrants (except for
the Minimum Expiration Value, if applicable). Investors who consider purchasing
Index Warrants should be experienced with respect to options and option
transactions and reach an investment decision only after carefully considering
the suitability of the Index Warrants in light of their particular
circumstances and the information set forth below as well as additional
information contained in the Prospectus Supplement relating to such Index
Warrants.

Unless otherwise provided in the Prospectus Supplement, each Index Warrant
will entitle Index Warrantholders to receive from the Company upon exercise the
Settlement Value of such Index Warrant. Certain Index Warrants issued pursuant
to an Index Warrant Trust Indenture will, if specified in the Prospectus
Supplement, entitle the Index Warrantholder to receive from the Company, under
certain circumstances specified in the Prospectus Supplement, a payment or
delivery equal to the greater of the applicable Settlement Value and a Minimum
Expiration Value of such Index Warrants. In addition, certain Index Warrants
will, if specified in the Prospectus Supplement, entitle Index Warrantholders
to receive from the Company a certain payment or delivery upon cancellation of
the Index Warrants by the Company, upon 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.

15
<PAGE>

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 Exchange Act
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
Warrantholders will not be entitled to receive definitive certificates
representing Index Warrants, unless the depository is unwilling or unable to
continue as depository or the Company decides to have the Index Warrants
represented by definitive certificates. A beneficial owner's interest in an
Index Warrant represented by a global Index Warrant will be recorded on or
through the records of the brokerage firm or other entity that maintains such
beneficial owner's account. In turn, the total number of Index Warrants held by
an individual brokerage firm or other entity for its clients will be maintained
on the records of the depository in the name of such brokerage firm or other
entity or its agent.

LISTING

Unless otherwise indicated in the Prospectus Supplement, the Index Warrants
will be traded pursuant to the rules of a self-regulatory organization as
specified in the Prospectus Supplement. It is expected that such self-
regulatory organization will cease trading an issue of Index Warrants at the
close of business on the related expiration date of such Index Warrants.

16
<PAGE>

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.

EVENTS OF DEFAULT

Certain events in bankruptcy, insolvency or reorganization of the Company
will constitute an Event of Default with respect to Index Warrants having a
Minimum Expiration Value which are issued under an Index Warrant Trust
Indenture. Upon the occurrence of an Event of Default, the holders of 25% of
unexercised Index Warrants may elect to receive a settlement payment or
delivery for such unexercised Index Warrants, which will immediately become due
to the Index Warrantholders upon such election in an amount equal to the market
value of such Index Warrants (assuming the Company's ability to satisfy its
obligations under such Index Warrants as they would become due) as of the date
the Company is notified of the intended liquidation, as determined by a
nationally recognized securities broker-dealer unaffiliated with the Company
and mutually selected by the Company and the Index Warrant Trustee.

MERGER, CONSOLIDATION, SALE, LEASE OR OTHER DISPOSITIONS

The Company may consolidate or merge with or into any other corporation and
the Company may sell, lease or convey all or substantially all of its assets to
any corporation, provided that (i) the corporation

17
<PAGE>

(if other than the Company) formed by or resulting from any such consolidation
or merger or which shall have received such assets shall be a corporation
organized and existing under the laws of the United States of America or a
State thereof and shall assume the Company's obligations in respect of the
payment or delivery of the Settlement Value (or any Minimum Expiration Value or
cancellation payment or delivery, if applicable) with respect to all the
unexercised Index Warrants and the performance and observance of all of the
covenants and conditions of the Index Warrant Agreement or Index Warrant Trust
Indenture, as the case may be, to be performed or observed by the Company, and
(ii) the Company or such successor corporation, as the case may be, shall not
immediately be in default under the Index Warrant Agreement or Index Warrant
Trust Indenture, as the case may be.

ENFORCEABILITY OF RIGHTS BY INDEX WARRANTHOLDERS

Any Index Warrantholder may, without the consent of the related Index Warrant
Agent, enforce by appropriate legal action, in and for its own behalf, its
right to exercise, and receive payment or delivery for, its Index Warrants.

PLAN OF DISTRIBUTION

The Company may sell Securities (i) through MLPF&S as agent, (ii) to the
public through, or through underwriting syndicates managed by, one or more of
the firms named on the cover page of this Prospectus or (iii) directly to
purchasers. The Prospectus Supplement with respect to the Securities of a
particular series describes the terms of the offering of such Securities,
including the name of the agent or the name or names of any underwriters, the
public offering or purchase price, any discounts and commissions to be allowed
or paid to the agent or underwriters, all other items constituting underwriting
compensation, the discounts and commissions to be allowed or paid to dealers,
if any, and the exchanges, if any, on which the Securities will be listed. Only
the agents or underwriters so named in the Prospectus Supplement are agents or
underwriters in connection with the Securities offered thereby. Under certain
circumstances, the Company may repurchase Securities and reoffer them to the
public as set forth above. The Company may also arrange for repurchases and
resales of such Securities by dealers.

If so indicated in the Prospectus Supplement, the Company will authorize
underwriters to solicit offers by certain institutions to purchase Debt
Securities from the Company pursuant to delayed delivery contracts providing
for payment and delivery on the date stated in the Prospectus Supplement. Each
such contract will be for an amount not less than, and, unless the Company
otherwise agrees, the aggregate principal amount of Debt Securities sold
pursuant to such contracts shall not be more than, the respective amounts
stated in the Prospectus Supplement. Institutions with whom such contracts,
when authorized, may be made include 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, as amended (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 Rule 2720 of the Conduct Rules of the National
Association of Securities Dealers, Inc.

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<PAGE>

EXPERTS

The consolidated financial statements and related financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Company's 1995 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 29, 1995 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 29, 1995 included in the 1995 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 included as an exhibit to the Registration
Statement or incorporated by reference herein. Such consolidated financial
statements and related financial statement schedules, such Summary Financial
Information and Selected Financial Data appearing or incorporated by reference
in this Prospectus and the Registration Statement of which this Prospectus is a
part, have been included or incorporated herein by reference in reliance upon
such reports of Deloitte & Touche LLP given upon their authority as experts in
accounting and auditing.

With respect to unaudited interim financial information for the periods
included in the Quarterly Reports on Form 10-Q which are 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 such Quarterly Report on Form 10-Q and
incorporated by reference herein, they did not audit and they do not express an
opinion on such interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. Deloitte & Touche LLP are
not subject to the liability provisions of Section 11 of the Act for any such
report on unaudited interim financial information because any such report is
not a "report" or a "part" of the registration statement prepared or certified
by an accountant within the meaning of Sections 7 and 11 of the Act.

19
<PAGE>

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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
Risk Factors............................................................... S-6
Recent Developments........................................................ S-8
Description of Securities.................................................. S-12
The Portfolio.............................................................. S-17
Certain United States Federal Income Tax Considerations.................... S-28
Use of Proceeds............................................................ S-32
Underwriting............................................................... S-32
Validity of Securities..................................................... S-32
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............................................. 7
Description of Debt Warrants............................................... 11
Description of Currency Warrants........................................... 12
Description of Index Warrants.............................................. 13
Plan of Distribution....................................................... 18
Experts.................................................................... 19
</TABLE>

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[LOGO]

2,500,000 UNITS

MERRILL LYNCH & CO., INC.

HEALTHCARE/BIOTECHNOLOGY
PORTFOLIO MARKET INDEX
TARGET-TERM SECURITIES(Service Mark)
DUE OCTOBER , 2001
"MITTS(registered Service Mark)"

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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.

SEPTEMBER , 1996

"MITTS" IS A REGISTERED SERVICE MARK AND "MARKET INDEX TARGET-
TERM SECURITIES" IS A SERVICE MARK OWNED BY MERRILL LYNCH & CO., INC.

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