MERRILL LYNCH & CO INC, 424B5, 1996-06-24

MERRILL LYNCH & CO INC
424B5, 1996-06-24
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

Previous: MERCK & CO INC, 10-K/A, 1996-06-24

Next: MEXICO FUND INC, N-30D, 1996-06-24

<PAGE>

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

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT, DATED JUNE 20, 1996

PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED APRIL 4, 1996)
[LOGO]

2,500,000 UNITS
MERRILL LYNCH & CO., INC.

TECHNOLOGY MARKET INDEX TARGET-TERM SECURITIES (Service Mark) DUE JULY , 2001
"MITTS(Registered Service Mark)"

An aggregate principal amount of $25,000,000 of Technology Market Index
Target-Term Securities (Service Mark) due July , 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 July , 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 CBOE Technology Index* (the "Index") over the Benchmark Index Value. The
Supplemental Redemption Amount will in no event be less than zero or more than
$10 per $10 principal amount of Securities, representing a maximum annualized
rate of return of 14.35% compounded semi-annually over a term of five years.
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 Index Value to
the Ending Index Value. The Benchmark Index Value will exceed the Starting
Index Value on the date the Securities are priced by the Company for initial
sale to the public (the "Pricing Date") by 10% to 20% (the actual percentage
will be determined on the Pricing Date). The Starting Index Value, as more
particularly described herein, will be the closing value of the Index on the
Pricing Date. The Benchmark Index 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 Index Value, as more particularly described herein,
will be the average (arithmetic mean) of the closing values of the Index on
certain days, or, if certain events occur, the closing value of the Index on a
single day prior to the maturity of the Securities.

FOR INFORMATION AS TO THE CALCULATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
WHICH WILL BE PAID AT MATURITY, THE CALCULATION AND THE COMPOSITION OF THE
INDEX, AND CERTAIN TAX CONSEQUENCES TO BENEFICIAL OWNERS OF THE SECURITIES,
SEE "DESCRIPTION OF SECURITIES", "THE INDEX", 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 Chicago Board Options
Exchange, Inc. (the "CBOE") and the New York Stock Exchange (the "NYSE") under
the symbol "TKM".

---------------
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 July , 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 July , 1996.

*The use and reference to the term "CBOE Technology Index" herein has been
consented to by the CBOE.
The "CBOE Technology Index" is a service mark of the CBOE.
"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 CHICAGO BOARD OPTIONS
EXCHANGE, INC., THE NEW YORK 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.

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

AVAILABLE INFORMATION

In addition to the locations specified under "Available Information" in the
accompanying Prospectus, the Securities and Exchange Commission (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.

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 Technology Market Index
Target-Term Securities due July , 2001. The
Securities are to be issued as a series of
Senior Debt Securities under the Chemical
Indenture described herein.

Listing..................... Application will be made to list the Securities
on the CBOE and on the NYSE under the symbol
"TKM".

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

Maturity.................... July , 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:

<TABLE>
<S> <C>
Principal Ending Index Value--Benchmark Index Value
Amount X -----------------------------------------
Benchmark Index Value
</TABLE>

Index....................... The CBOE Technology Index (the "Index") is a
price-weighted stock index designed, developed,
maintained and operated by, and is a service
mark of, the CBOE. The Index is designed to
measure the composite price performance of
common stocks of companies involved in the
design and manufacture of high technology
components and systems.

The Index is being used by the Company with the
permission of the CBOE. The Index consists of
the stocks of 30 issuers involved in various
aspects of the high technology industry segment,

S-3
<PAGE>

including: computer services, telecommunications
equipment, server software and hardware, design
software, PC software and hardware, networking,
peripherals, and semiconductors. All of the
stocks in the Index are securities of U.S.
issuers and currently trade on the NYSE or as
National Market securities traded through
Nasdaq. The Index has a base date of January 3,
1995, on which date the Index equaled 100.00.

Stocks that constitute the Index may be changed
or substituted by the CBOE based on certain
criteria. See "The Index" herein. The CBOE is
under no obligation to continue the calculation
and the dissemination of the Index. If the CBOE
or any third party discontinues publication of
the Index or any Successor Index, the
Calculation Agent shall determine for the
remaining Calculation Days in the Calculation
Period the value to be substituted for the Index
for each such Calculation Day based on the
formula and method used in calculating the Index
in effect on the date the Index or any Successor
Index (as defined below) was last published. See
"Risk Factors" herein.

Index Symbol on reporting
services operated by TXX
Bloomberg, L.P. ............

Risk Factors................ The Securities are subject to certain special
considerations. On the Pricing Date, the
Benchmark Index Value will exceed the Starting
Index Value by 10% to 20% (the actual percentage
will be determined on the Pricing Date).
Investors should be aware that if the Ending
Index Value does not exceed the Starting Index
Value by more than 10% to 20% (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.

In no event will the Supplemental Redemption
Amount exceed $10 per $10 principal amount of
Securities. As a result, beneficial owners of
Securities will not benefit from Index increases
in excess of approximately 120% to 140% (the
actual percentage will be determined on the
Pricing Date) above the Starting Index Value
determined on the Pricing Date (the "Maximum
Index Value").

There is no 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 trading value of the
Securities is expected to

S-4
<PAGE>

depend substantially on the extent of the
appreciation, if any, of the Index over the
Benchmark Index Value. See "The Index--
Historical Data on the Index" in this Prospectus
Supplement for historical values of the Index.
If, however, Securities are sold prior to the
maturity date at a time when the Index exceeds
the Benchmark Index 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 Index over the Benchmark
Index Value were to prevail until maturity of
the Securities because of the possible
fluctuation of the Index between the time of
such sale and the time that the Ending Index
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
Index is below, equal to or not sufficiently
above the Benchmark Index Value. The limitation
that the Supplemental Redemption Amount may not
exceed $10 per $10 principal amount of
Securities may adversely affect the secondary
market value of the Securities and such adverse
effect could occur even if the value of the
Index is below the Maximum Index Value. A
discount could also result from rising interest
rates.

The Index does not reflect the payment of
dividends on the stocks underlying it and,
therefore, the yield based on the Index to the
maturity of the Securities will not produce the
same yield as if such underlying stocks were
purchased and held for a similar period. See
"Risk Factors" in this Prospectus Supplement.

The value of the Index and the Supplemental
Redemption Amount, if any, may be adversely
affected by political, economic and other
developments that affect the stocks underlying
the Index. Since the stocks underlying the Index
are of companies involved in various aspects of
the high technology industry segment, factors
affecting this industry segment may affect the
value of the Index 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. See
"Certain United States Federal Income Tax
Considerations" in this Prospectus Supplement.

S-5
<PAGE>

RISK FACTORS

PAYMENT AT MATURITY

Benchmark Index Value will Exceed Value of Index on the Pricing Date. On the
Pricing Date, the Benchmark Index Value will exceed the Starting Index Value
by 10% to 20% (the actual percentage will be determined on the Pricing Date).
Investors should be aware that if, at maturity, the Ending Index Value does
not exceed the Starting Index Value by more than 10% to 20% (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.

Limitation of Supplemental Redemption Amount. Because the Supplemental
Redemption Amount will not exceed $10 per $10 principal amount of Securities,
beneficial owners of Securities will not benefit from Index increases in
excess of approximately 120% to 140% (the actual percentage will be determined
on the Pricing Date) above the Starting Index Value determined on the Pricing
Date (the "Maximum Index Value"). In no event will the Supplemental Redemption
Amount exceed $10 per $10 principal amount of Securities.

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

TRADING

Application will be made to list the Securities on the CBOE and on the NYSE
under the symbol "TKM". There is no 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 trading value of the Securities is expected to depend substantially on
the extent of the appreciation, if any, of the Index over the Benchmark Index
Value. See "The Index--Historical Data on the Index" in this Prospectus
Supplement for historical values of the Index. If, however, Securities are
sold prior to the maturity date at a time when the Index exceeds the Benchmark
Index 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 Index
over the Benchmark Index Value were to prevail until maturity of the
Securities because of the possible fluctuation of the Index between the time
of such sale and the time that the Ending Index 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 Index is below, equal
to, or not sufficiently above the Benchmark Index Value. The limitation that
the Supplemental Redemption Amount will not exceed $10 per $10 principal
amount of Securities may adversely affect the secondary market value of the
Securities and such adverse effect could occur even if the value of the Index
is below the Maximum Index Value. A discount could also result from rising
interest rates.

In addition to the value of the Index, 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.

S-6
<PAGE>

Accordingly, investors should be aware that factors other than the level of
the Index 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 Index. Rising interest rates may lower the value of the Index
and, thus, may decrease the trading value of the Securities. Falling interest
rates may increase the value of the Index and, thus, may increase the trading
value of the Securities.

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

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

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

The impact of the factors specified above, excluding the value of the Index,
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 Index. 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 Index 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, Index volatility and/or dividend rates of stocks comprising
the Index 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 Index in
excess of the Benchmark Index 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 INDEX

The value of the Index and the Supplemental Redemption Amount, if any, may
be adversely affected by political, economic and other developments that
affect the stocks underlying the Index. Since the stocks underlying the Index
are of companies involved in various aspects of the high technology industry
segment, factors affecting this industry segment may affect the value of the
Index and therefore the trading value of the Securities.

OTHER CONSIDERATIONS

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

S-7
<PAGE>

Investors should also consider the tax consequences of investing in the
Securities. 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 Index 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 March 29, 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>
THREE MONTHS ENDED
----------------------------
MARCH 31, MARCH 29,
INCOME STATEMENT INFORMATION 1995 1996
- ---------------------------- --------------- ------------
(IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C>
Revenues........................................... $ 5,204 $ 6,019
Net revenues....................................... $ 2,421 $ 3,261
Earnings before income taxes....................... $ 380 $ 671
Net earnings....................................... $ 228 $ 409
Ratio of earnings to fixed charges(1).............. 1.1 1.2
<CAPTION>
AT DECEMBER 29, AT MARCH 29,
BALANCE SHEET INFORMATION(2) 1995 1996
- ---------------------------- --------------- ------------
(IN MILLIONS)
<S> <C> <C>
Total assets....................................... $176,857 $195,884
Long-term borrowings............................... $ 17,340 $ 20,226
Stockholders' equity............................... $ 6,141 $ 6,364
</TABLE>

- --------
(1) 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.
(2) 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 March 29, 1996, $526
million of bank loans and $17,222 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
March 29, 1996, cash deposits for securities loaned and securities sold
under agreements to repurchase amounted to $3,768 million and $61,657
million, respectively. From March 30, 1996 to June 14, 1996, long-term
borrowings, net of repayments and repurchases, increased by approximately
$1,683 million.

FIRST QUARTER 1996

Global financial markets were generally strong during 1995, led by a stable
U.S. economy, declining interest rates, and heightened investor activity.
Market expectations for additional declines in interest rates continued
through February 1996, fueling further market advances, strong investor and
issuer activity, higher fee-based revenues, and improved trading profits
industrywide. In March 1996, inflationary fears were stirred by the release of
U.S. economic statistics indicating stronger than anticipated growth and the
Federal Reserve's decision to hold short-term interest rates at current
levels. This led to increases in long-term interest rates and greater market
volatility, although interest rates remained low relative to the year-ago
period.

S-9
<PAGE>

Net earnings for the 1996 first quarter were a record $409 million, up 80%
from 1995 first quarter net earnings of $228 million. Earnings per common
share were $2.03 primary and fully diluted in the 1996 first quarter, compared
with $1.08 primary and fully diluted in the 1995 first quarter. Total revenues
were a record $6,019 million in the first quarter of 1996, up 16% from the
1995 first quarter. Net revenues (revenues after interest expense) totaled
$3,261 million in the first quarter of 1996, up 35% from the 1995 first
quarter.

Commissions revenues rose 44% to a record $989 million from $685 million in
the 1995 first quarter. Commissions revenues from listed and over-the-counter
securities increased to record levels due to higher trading volumes on most
major U.S. and international exchanges. Mutual fund commissions advanced to
record levels due to strong sales of both domestic and offshore funds.

Interest and dividend revenues decreased to $3,010 million from $3,030
million in the 1995 first quarter. Interest expense, which includes dividend
expense, decreased to $2,758 million from $2,783 million in the year-ago
quarter. Net interest and dividend profit was $252 million, up slightly from
$247 million in 1995, with increases in net interest-earning assets
substantially offset by the effect of lower interest rates.

Principal transactions revenues increased 46% from the 1995 first quarter to
a record $982 million, as higher investor activity and market volatility led
to increases in virtually all trading products. Equities and equity
derivatives trading revenues, in the aggregate, were up 109% to $347 million.
Trading revenues from most equity products increased, due primarily to higher
trading volume and rising stock prices. International equities trading
revenues, in particular, benefited from the addition of Smith New Court
trading activity. Taxable fixed-income trading revenues rose 62% to $265
million due primarily to higher revenues from non-U.S. governments and
agencies, mortgage-backed securities, and high-yield bonds. Non-U.S.
governments and agencies trading revenues advanced due to improved results
from trading of Japanese Government Bonds, as well as increased trading volume
in certain Latin American emerging markets as credit ratings improved and
investors sought higher returns. Mortgage-backed securities trading revenues
increased due primarily to improved liquidity and increased customer demand
compared with the year-ago period. Trading revenues from high-yield bonds were
up due to lower interest rates and improved credit ratings of certain issuers.
Interest rate and currency swap trading revenues increased 9% to $255 million
due to higher trading revenues from non-U.S. dollar-denominated transactions,
partially offset by decreases in revenues from U.S. dollar-denominated
transactions. Foreign exchange and commodities trading revenues, in the
aggregate, rose 94% from the 1995 first quarter to $40 million, as foreign
exchange trading revenues continued to benefit from the strengthening of the
U.S. dollar versus other major currencies. Municipal securities trading
revenues declined 17% to $75 million, primarily due to continued weak investor
demand for tax-exempt investments.

Investment banking revenues were $378 million, up 52% from $249 million in
the 1995 first quarter. Underwriting revenues increased 82%, benefiting from
strong levels of debt and equity underwriting industrywide, with higher fees
from convertibles, corporate bonds and preferred stock, equities, and high-
yield securities. Strategic services revenues were down slightly from a year
ago, but remained comparable to record 1995 levels, benefiting from continued
strong merger and acquisition activity.

Asset management and portfolio service fees rose 20% in 1996 to a record
$538 million from $448 million in the first quarter of 1995, primarily as a
result of strong inflows of client assets. Other revenues were $122 million,
up 4% from $117 million reported in the 1995 first quarter.

Non-interest expenses were $2,590 million, up 27% from $2,041 million in the
year-ago period. Compensation and benefits expense, which represented
approximately 65% of non-interest expenses, increased 33% due primarily to
higher incentive and production-related compensation as well as a 6% increase
in the number of full-time employees, largely due to acquisitions.
Compensation and benefits expense as a percentage of net revenues was 51.8% in
the first quarter of 1996, compared with 52.5% in the 1995 first quarter.

Occupancy costs increased 5% from the 1995 first quarter primarily due to
international growth. Other facilities-related costs, which include
communications and equipment rental expense and depreciation and

S-10
<PAGE>

amortization expense, rose 16% primarily due to higher levels of business
activity and increased 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 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 development expenses increased
33% from the 1995 first quarter. Increased international travel and higher
advertising and client promotion costs contributed to this advance. Brokerage,
clearing, and exchange fees rose 27% as a result of higher trading volume,
particularly in international markets. Other expenses increased 4% from 1995,
primarily due to goodwill amortization related to Smith New Court.

Income tax expense totaled $262 million in the 1996 first quarter. The
effective tax rate in the 1996 first quarter was 39.0%, compared with 40.0% in
the first quarter of 1995. The decrease in the effective tax rate was
primarily attributable to increases in dividends qualifying for the Federal
dividends received deduction, lower state taxes, and expanded international
business activities.

CERTAIN BALANCE SHEET INFORMATION AS OF MARCH 29, 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 additional risks related to the creditworthiness of the issuers and
the liquidity of the market for such securities.

At March 29, 1996, the fair value of long and short non-investment grade
trading inventories amounted to $6,026 million and $529 million, respectively,
and in the aggregate (i.e., the sum of long and short trading inventories)
represented 6.6% of aggregate consolidated trading inventories.

At March 29, 1996, the carrying value of extensions of credit provided to
corporations entering into leveraged transactions aggregated $517 million
(excluding unutilized revolving lines of credit and other lending commitments
of $75 million), consisting primarily of senior term and subordinated
financings to 34 medium-sized corporations. In addition, at March 29, 1996,
the Company had an outstanding bridge loan of $90 million, and as of May 6,
1996, the Company had an outstanding bridge loan commitment for $100 million.
Direct equity investments made in conjunction with the Company's investment
and merchant banking activities aggregated $189 million at March 29, 1996,
representing investments in 62 enterprises. At March 29, 1996, the Company
held interests in partnerships, totaling $82 million, that invest in highly
leveraged transactions and non-investment grade securities. At March 29, 1996,
the Company also committed to invest an additional $83 million in partnerships
that invest in leveraged transactions.

The Company's insurance subsidiaries hold non-investment grade securities.
Non-investment grade securities were 4.7% of total insurance investments at
March 29, 1996. Non-investment grade securities of insurance subsidiaries are
classified as available-for-sale and are carried at fair value.

At March 29, 1996, the largest non-investment grade concentration consisted
of various issues of a South American sovereign totaling $764 million, which
primarily represented on-balance-sheet hedges for off-balance-sheet financial
instruments. No one industry sector accounted for more than 31% of total non-
investment grade positions. At March 29, 1996, the Company held an aggregate
carrying value of $169 million in debt and equity securities of issuers in
various stages of bankruptcy proceedings or in default, of which 80% 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 "Chemical Indenture", which is more
fully described in the accompanying Prospectus. The Securities will mature on
July , 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 Index Value does not exceed the Benchmark
Index 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:

<TABLE>
<S> <C>
Principal Ending Index Value--Benchmark Index Value
Amount X -----------------------------------------
Benchmark Index Value
</TABLE>

provided, however, that in no event will the Supplemental Redemption Amount be
less than zero or more than $10 per $10 principal amount of Securities. The
Benchmark Index Value will be the Starting Index Value on the Pricing Date
multiplied by a factor equal to 110% to 120% as determined by the Company on
the Pricing Date. The Starting Index Value will be the closing index value on
the date the Securities are priced by the Company for initial sale to the
public. The Benchmark Index 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 Index 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 Index determined on
each of the first five Calculation Days during the Calculation Period. If
there are fewer than five Calculation Days, then the Ending Index Value will
equal the average (arithmetic mean) of the closing values of the Index on such
Calculation Days, and if there is only one Calculation Day, then the Ending
Index Value will equal the closing value of the Index on such Calculation Day.
If no Calculation Days occur during the Calculation Period because of Market
Disruption Events, then the Ending Index Value will equal the closing value of
the Index determined on the last scheduled Index 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 Index Business Day prior to the maturity date to and
including the second scheduled Index Business Day prior to the maturity date.
"Calculation Day" means any Index Business Day during the Calculation Period
on which a Market Disruption Event has not occurred. For purposes of
determining the Ending Index Value, an "Index Business Day" is a day on which
the NYSE is open for trading and trading generally occurs in the over-the-
counter market for equity securities and the Index or any Successor Index is
calculated and published. All determinations made by the Calculation Agent
shall be at the sole discretion of the Calculation Agent and, absent a
determination by the Calculation Agent of a manifest error, shall be
conclusive for all purposes and binding on the Company and beneficial owners
of the Securities.

S-12
<PAGE>

The following table illustrates, for a range of hypothetical Ending Index
Values, (i) the total amount payable at maturity for each $10 principal amount
of Securities (assuming a Benchmark Index Value which equals 115% (the
midpoint of an expected offering range of 110% to 120%) of the Starting Index
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 Index (which includes an assumed aggregate dividend
yield of 0.20% 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 STOCKS UNDERLYING
INDEX VALUE INDEX VALUE MATURITY(1) SECURITIES(2) THE INDEX(2)(3)
------------------- ----------------- ----------- ------------------ -----------------
<S> <C> <C> <C> <C>
85 -50% $10.00 0.00% -13.20%
102 -40% $10.00 0.00% -9.77%
119 -30% $10.00 0.00% -6.81%
136 -20% $10.00 0.00% -4.22%
153 -10% $10.00 0.00% -1.90%
170(4) 0% $10.00 0.00% 0.20%
187 10% $10.00 0.00% 2.12%
204 20% $10.43 0.84% 3.88%
221 30% $11.30 2.46% 5.52%
238 40% $12.17 3.97% 7.05%
255 50% $13.04 5.38% 8.49%
272 60% $13.91 6.71% 9.84%
289 70% $14.78 7.97% 11.12%
306 80% $15.65 9.16% 12.33%
323 90% $16.52 10.30% 13.48%
340 100% $17.39 11.38% 14.58%
357 110% $18.26 12.41% 15.63%
374 120% $19.13 13.40% 16.64%
391 130% $20.00 14.35% 17.60%
408 140% $20.00 14.35% 18.53%
425 150% $20.00 14.35% 19.43%
</TABLE>
- --------
(1) The total amount payable at maturity assumes a Benchmark Index Value which
equals 115% (the midpoint of an expected offering range of 110% to 120%)
of the Starting Index 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 Index with the allocation of such amount reflecting
the relative weights of such stocks in the Index; (ii) a percentage change
in the aggregate price of such stocks that equals the percentage change in
the Index from the Starting Index Value to the relevant hypothetical
Ending Index Value; (iii) a constant dividend yield of 0.20% per annum,
paid quarterly from the date of initial delivery of Securities, applied to
the value of the Index at the end of each such quarter assuming such value
increases or decreases linearly from the Starting Index Value to the
applicable hypothetical Ending Index Value; (iv) no transaction fees or
expenses; (v) a five year maturity of the Securities from the date of
issuance; and (vi) a final Index value equal to the Ending Index Value.
The aggregate dividend yield of the stocks underlying the Index as of June
11, 1996 was approximately 0.20%.

(4) Approximate value of the Index on June 11, 1996.

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

S-13
<PAGE>

ADJUSTMENTS TO THE INDEX; MARKET DISRUPTION EVENTS

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

"Market Disruption Event" means 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 each case, for more than two hours of trading in 5 or more
of the securities included in the Index, or

(ii) the suspension or material limitation, in each case, for more than
two hours of trading (whether by reason of movements in price otherwise
exceeding levels permitted by the relevant exchange or otherwise) in option
contracts on the Index which are traded on the Chicago Board Options
Exchange, Inc.

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

DISCONTINUANCE OF THE INDEX

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

If the CBOE discontinues publication of the Index and a Successor Index is
not selected by the Calculation Agent or is no longer published on any of the
Calculation Days, the value to be substituted for the Index 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
Index prior to any such discontinuance. If a Successor Index is selected or
the Calculation Agent calculates a value as a substitute for the Index as
described below, such Successor Index or value shall be substituted for the
Index for all purposes, including for purposes of determining whether a Market
Disruption Event exists.

If the CBOE discontinues publication of the Index prior to the period during
which the Supplemental Redemption Amount is to be determined and the
Calculation Agent determines that no Successor Index is available at such
time, then on each Business Day until the earlier to occur of (i) the
determination of the Ending Index Value and (ii) a determination by the
Calculation Agent that a Successor Index is available, the Calculation Agent
shall determine the value that would be used in computing the Supplemental
Redemption Amount as

S-14
<PAGE>

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 Index may
adversely affect trading in the Securities.

EVENTS OF DEFAULT AND ACCELERATION

In case an Event of Default with respect to any Securities shall have
occurred and be continuing, the amount payable to a beneficial owner of a
Security upon any acceleration permitted by the Securities, with respect to
each $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").

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

S-15
<PAGE>

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 Chemical 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 Chemical Indenture, including for purposes of receiving any reports
delivered by the Company or the Trustee pursuant to the Chemical 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 Chemical Indenture. The
Company understands that under existing industry practices, in the event that
the Company requests any action of Holders or that an owner of a beneficial
interest in such a Global Security desires to give or take any action which a
Holder is entitled to give or take under the Chemical 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.

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.

S-16
<PAGE>

THE INDEX

Unless otherwise stated, all information herein on the Index is derived from
the CBOE or other publicly available sources. Such information reflects the
policies of the CBOE as stated in such sources and such policies are subject
to change by the CBOE.

The Index is a price-weighted stock index designed, developed, maintained
and operated by, and is a service mark of, the CBOE. The Index is designed to
provide an indication of the composite price performance of the common stocks
of companies involved in the U.S. high technology industry segment (i.e.,
companies involved in the design and manufacture of high technology components
and systems). The Index consists of the stocks of 30 issuers involved in
various aspects of the high technology industry segment, including: computer
services, telecommunications equipment, server software and hardware, design
software, PC software and hardware, networking, peripherals, and
semiconductors. (See the table below for a list of the stocks underlying the
Index as of June 11, 1996.) The CBOE selects companies for inclusion in the
Index with the aim of representing the spectrum of companies that develop
components and systems that define high technology. Relevant criteria employed
by the CBOE include the viability of the particular company, the extent to
which that company represents the high technology sector, the extent to which
the market price of that company's common stock is generally responsive to
changes in the affairs of the technology sector and the market value and
trading activity of the common stock of that company. As of June 11, 1996, the
30 companies included in the Index were divided into five main individual
groups. These individual groups comprised the following (with the number of
companies currently included in each group indicated in parentheses): Computer
Hardware (8), Computer Software (6), Computer Systems & Services (6),
Telecommunications (5) and Semiconductors (5). The CBOE may from time to time,
in its sole discretion, add companies to, or delete companies from, the Index
to achieve the objectives stated above. The Index has a base date of January
3, 1995.

The common stocks comprising the Index are currently listed either on the
New York Stock Exchange or traded through Nasdaq. As of June 11, 1996, the 30
companies included in the Index had an aggregate market value $454.4 billion,
with an average capitalization of $15.1 billion. The Index components ranged
in size from $72.5 billion to $1.2 billion, with a median capitalization of
$5.2 billion. All of the stocks are currently the subject of listed options
trading in the U.S.

The average monthly trading volumes per Index component over the six month
period ending May 31, 1996 ranged from a low of 5.5 million shares to a high
of 203.5 million shares. As of June 11, 1996, the largest stock in the Index,
by value, accounted for 8.05% of the Index, while the smallest represented
0.93% of the Index. Also on that date, the top five stocks in the Index
accounted for 31.90% of the Index by value.

The Index satisfies the CBOE's generic maintenance standards for options on
narrow-based stock indexes.

COMPUTATION OF THE INDEX

The Index is a price-weighted index (i.e., the weight in the Index of a
stock underlying the Index (an "Underlying Stock") is based on its price per
share rather than the total market capitalization of the issuer of such stock)
and reflects changes in the prices of the Underlying Stocks relative to the
index base date, January 3, 1995, when the Index equaled 100.00. Specifically,
the Index value is calculated by (i) totaling the prices of a single share of
each of the Underlying Stocks (the "Market Price Aggregate"), and (ii)
dividing the Market Price Aggregate by the Index Divisor. The Index Divisor
was originally chosen to result in an Index value of 100 on January 3, 1995,
and is subject to periodic adjustments as set forth below. The stock prices
used to calculate the Index are those reported by a primary market for the
Underlying Stocks.

The CBOE adjusts the foregoing Index Divisor to negate the effects of
changes in the price of an Underlying Stock that are determined by the CBOE to
be arbitrary and not due to market fluctuations. Such adjustments may result
from stock splits, certain consolidations and acquisitions, the grant to
shareholders of the right to

S-17
<PAGE>

purchase other securities of the issuer (e.g., spinoffs and rights issuances).
The CBOE may also adjust the Index Divisor because of the substitution of an
Underlying Security. In all such cases, the CBOE first recalculates the Market
Price Aggregate and then determines a new Index Divisor based on the following
formula:

<TABLE>
<S> <C> <C> <C> <C>
Old Divisor X New Market Price Aggregate = New Divisor
--------------------------
Old Market Price Aggregate
</TABLE>

The Index will be maintained by the CBOE. The Index is reviewed on
approximately a monthly basis by the CBOE staff. The CBOE may change the
composition of the Index at any time to reflect changes affecting the
components of the Index or the technology industry generally. If it becomes
necessary to remove a stock from the Index (for example, because of a takeover
or merger), the CBOE will only add a stock having characteristics that will
permit the Index to remain within the maintenance criteria specified in CBOE
Rules and within the applicable rules of the Securities and Exchange
Commission. These maintenance criteria currently provide, among other things,
that each component security must have (1) a market capitalization of a least
$75 million, except that securities accounting for the bottom 10% of the
weight of the Index may have market capitalizations of at least $50 million,
and (2) trading volume of at least 500,000 shares in each of the last six
months, except that securities accounting for the bottom 10% of the weight of
the Index may have trading volumes of at least 400,000 shares in each of the
last six months. Additionally, as of the first trading day of each January and
July, no single security may account for over 25% of the weight of the Index
and no five securities may account for over 50% of the weight of the Index.
Furthermore, each component security must be a reported security as defined in
Rule 11Aa3-1 of the Securities Exchange Act of 1934, as amended. Finally, at
least 90% of the weight of the Index and 80% of the number of components in
the Index must be eligible for standardized options trading pursuant to CBOE
Rules or, if currently listed for options trading, must meet the applicable
maintenance standards specified in CBOE Rules. The CBOE will also take into
account the capitalizations, liquidity, volatility, and name recognition of
any proposed replacement stock.

Absent prior approval of the Securities and Exchange Commission, the CBOE
will not increase to more than 40, or decrease to fewer than 20, the number of
stocks in the Index. Additionally, the CBOE will not make any change in the
composition of the Index that would cause fewer than 90% of the stocks by
weight, or fewer than 80% of the total number of stocks in the index, to
qualify as stocks eligible for equity options trading under CBOE rules.

The CBOE is under no obligation to continue the calculation and
dissemination of the Index and the method by which the Index is calculated and
the name "CBOE Technology Index" may be changed at the discretion of the CBOE.
The Securities are not sponsored, endorsed, sold or promoted by the CBOE. No
inference should be drawn from the information contained in this Prospectus
Supplement that the CBOE makes any representation or warranty, implied or
express, to the Company, the beneficial owners of Securities or any member of
the public regarding the advisability of investing in securities generally or
in the Securities in particular or the ability of the Index to track general
stock market performance. The CBOE has no obligation to take the needs of the
Company or the beneficial owners of Securities into consideration in
determining, composing or calculating the Index. The CBOE is not responsible
for, and has not participated in the determination of the timing of prices for
or quantities of, the Securities to be issued or in the determination or
calculation of the equation by which the Supplemental Redemption Amount is
determined. The CBOE has no obligation or liability in connection with the
administration, marketing or trading of the Securities.

The use of and reference to the Index in connection with the Securities have
been consented to by the CBOE.

Except with respect to the responsibility of the Calculation Agent to make
certain calculations under certain circumstances as described herein, none of
the Company, the Trustee, the Calculation Agent or the Underwriter has
undertaken independent diligence of the calculation, maintenance or
publication of the Index or any Successor Index. The CBOE disclaims all
responsibility for any inaccuracies in the data on which the Index is

S-18
<PAGE>

based and any mistakes or errors or omissions in the calculation or
dissemination of the Index and for the manner in which the Index is used in
determining the Supplemental Redemption Amount, if any.

The following table presents the net value for each of the component stocks
in the Index as of June 11, 1996 relative to the overall value of the Index.
<TABLE>
<CAPTION>
INDEX
COMPANY NAME WEIGHT*
------------ -------
<S> <C>
APPLE COMPUTER, INC............................................... 1.58%
ADOBE SYSTEMS INC................................................. 2.40%
ADC TELECOMMUNICATIONS INC........................................ 3.03%
ADAPTEC INC....................................................... 3.46%
ADVANCED MICRO DEVICES INC........................................ 1.10%
BAY NETWORKS INC.................................................. 1.75%
COMPUTER ASSOCIATES INTERNATIONAL................................. 4.50%
3COM CORP......................................................... 3.18%
COMPAQ COMPUTER CORP.............................................. 3.19%
CIRRUS LOGIC INC.................................................. 1.27%
CABLETRON SYSTEMS INC............................................. 4.57%
COMPUTER SCIENCES CORP............................................ 5.07%
CISCO SYSTEMS INC................................................. 3.75%
DIGITAL EQUIPMENT CORP............................................ 3.15%
DSC COMMUNICATIONS CORP........................................... 1.89%
HEWLETT PACKARD CO................................................ 7.02%
IBM............................................................... 6.80%
INTEL CORP........................................................ 4.96%
MOTOROLA INC...................................................... 4.27%
MICROSOFT CORP.................................................... 8.05%
MICRON TECHNOLOGY INC............................................. 1.98%
NOVELL INC........................................................ 0.93%
ORACLE CORPORATION................................................ 2.23%
PICTURETEL CORP................................................... 2.40%
PARAMETRIC TECHNOLOGY CORP........................................ 3.15%
SEAGATE TECHNOLOGY INC............................................ 3.31%
SILICON GRAPHIC INC............................................... 1.75%
SYNOPSYS INC...................................................... 2.93%
TELLABS INC....................................................... 4.12%
XILINX INC........................................................ 2.19%
</TABLE>
--------
* The sum of Index Weight percentages may be less than 100% due to
rounding.

HISTORICAL DATA ON THE INDEX

The following table sets forth the level of the Index at the end of each
month, in the period from January 1994 through May 1996. All historical data
presented in the following table relating to periods before August 8, 1995
(the date the CBOE commenced the daily calculation and public dissemination of
the Index) were calculated by the CBOE and are presented as if the Index had
existed during such periods, based on the stocks underlying the Index as of
August 8, 1995, and such closing levels have been calculated hypothetically on
the same basis that the Index is calculated. All historical data presented in
the following table relating to periods after August 8, 1995 are based on
actual data from the Index. These historical data on the Index are not
necessarily indicative of the future performance of the Index or what the
value of the Securities may be. Any historical upward or downward trend in the
level of the Index during any period set forth below is not any

S-19
<PAGE>

indication that the Index is more or less likely to increase or decrease at any
time during the term of the Securities.

<TABLE>
<CAPTION>
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
1994:
January................................................. 86.05
February................................................ 88.43
March................................................... 83.53
April................................................... 83.59
May..................................................... 82.37
June.................................................... 77.10
July.................................................... 81.32
August.................................................. 89.25
September............................................... 90.24
October................................................. 100.28
November................................................ 97.91
December................................................ 101.72
1995:
January................................................. 100.61
February................................................ 108.94
March................................................... 116.44
April................................................... 128.63
May..................................................... 131.72
June.................................................... 146.45
July.................................................... 159.28
August.................................................. 160.25
September............................................... 162.29
October................................................. 168.95
November................................................ 168.28
December................................................ 156.53
1996:
January................................................. 159.75
February................................................ 167.66
March................................................... 154.17
April................................................... 171.41
May..................................................... 175.15
</TABLE>

S-20
<PAGE>

The following graph sets forth the historical performance of the Index at the
end of each month from January 1994 through May 1996. Past movements of the
Index are not necessarily indicative of the future Index values. On June 11,
1996 the closing level of the Index was 169.83.

[The Graph sets forth historical month-end closing levels of the Index from
January 1994 through May 1996, with the vertical axis specifying the month-end
closing level of the Index in a range from 0 to 200 in increments of 20 and
the horizontal axis specifying the time period in increments of three months
from January 1994 to May 1996.]

Source: Prepared by the Company from data obtained from the CBOE.

S-21
<PAGE>

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

Set forth in full below is the opinion of Brown & Wood, counsel to the
Company, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the Securities. Such opinion is based
upon laws, regulations, rulings and decisions now in effect (or, in the case
of certain regulations, in final form but not yet effective), 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 (except possibly the Final
Regulations as described below), 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

Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument generally will be taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or
are received (in accordance with the U.S. Holder's regular method of tax
accounting). Under these

S-22
<PAGE>

principles, the amount payable at maturity with respect to a Security in
excess of the principal amount thereof (i.e., the Supplemental Redemption
Amount), if any, would be treated as contingent interest and generally would
be includible in income by a U.S. Holder as ordinary interest on the date the
Supplemental Redemption Amount is accrued (i.e., generally when the
Supplemental Redemption Amount becomes fixed in amount and becomes
unconditionally payable) or when such amount is received (in accordance with
the U.S. Holder's regular method of tax accounting). In addition, if the
amount payable at maturity with respect to a Security exceeds the principal
amount thereof, then such Security would be treated as having been retired at
maturity in exchange for an amount equal to the principal amount thereof.

Upon the sale, exchange or retirement of a Security, a U.S. Holder generally
would recognize taxable gain or loss in an amount equal to the difference, if
any, between the amount realized on the sale, exchange or retirement and such
U.S. Holder's adjusted tax basis in the Security. A U.S. Holder's adjusted tax
basis in a Security generally will equal such U.S. Holder's initial investment
in the Security. Such gain or loss generally should be capital gain or loss
and should be long-term capital gain or loss if the Security has been held by
the U.S. Holder for more than one year (subject to the market discount rules,
as discussed below). It is possible, however, that the IRS could assert that
any amounts realized upon the sale or exchange of a Security prior to its
maturity in excess of the principal amount thereof constitutes ordinary
interest income (subject to the bond premium rules, as discussed below).
Nonetheless, although the matter is not free from doubt, under current law,
any gain realized upon the sale or exchange of a Security prior to its
maturity should be treated entirely as capital gain (subject to the market
discount rules, as discussed below).

Prospective investors in the Securities should be aware that 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. The Final
Regulations, however, only apply to debt instruments issued on or after August
13, 1996. Accordingly, the Final Regulations will not apply to the Securities.
In general, the Final Regulations would cause the timing and character of
income, gain or loss reported on a contingent payment debt instrument to
substantially differ from the timing and character of income, gain or loss
reported on a contingent payment debt instrument under general principles of
current United States Federal income tax law (as described above).
Specifically, the Final Regulations generally require a U.S. Holder of such an
instrument to include future contingent 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 will
be treated as ordinary income and 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. Prospective investors in the
Securities are urged to consult their own tax advisers concerning the effect,
if any, of the Final Regulations on their investment in the Securities.

The Company, where required, currently intends to file information returns
with the IRS treating each Security as a debt instrument of the Company for
United States Federal income tax purposes (as discussed above) and reporting
contingent interest on, if any, and gross proceeds received upon the sale,
exchange or retirement of each Security in accordance with general principles
of current United States Federal income tax law (as described above), in the
absence of any change or clarification in the law, by regulation or otherwise
requiring a different treatment of the Securities.

MARKET DISCOUNT AND PREMIUM

If a U.S. Holder purchases a Security for an amount that is less than the
Security's issue price (i.e., the Security's stated principal amount), the
amount of the difference will be treated as "market discount," unless such
difference is less than a specified de minimis amount (generally 1/4 of 1% of
the Security's stated redemption price at maturity (as defined below)
multiplied by the number of complete years to maturity from the date the U.S.
Holder purchased such Security).

S-23
<PAGE>

Under the market discount rules, a U.S. Holder will be required to treat any
gain realized on the sale, exchange, retirement or other disposition of a
Security as ordinary income to the extent of the lesser of (i) the amount of
such realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Security at the
time of such disposition. Market discount will be considered to accrue ratably
during the period from the date of acquisition to the Security's maturity,
unless the U.S. Holder elects to accrue market discount on the basis of
semiannual compounding.

A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Security with market discount until the Security's
maturity or certain earlier dispositions of the Security, because a current
deduction is only allowed to the extent the interest expense exceeds an
allocable portion of market discount. A U.S. Holder may elect to include
market discount in income currently as it accrues (on either a ratable or
semiannual compounding basis), in which case the rules described above
regarding the treatment as ordinary income of gain upon the disposition of the
Security and regarding the deferral of interest deductions will not apply.
Generally, such currently included market discount is treated as ordinary
interest for United States Federal income tax purposes and a U.S. Holder would
increase its tax basis in the Security by the amount of any such currently
included market discount. Such an election will apply to all debt instruments
acquired by the U.S. Holder on or after the first day of the first taxable
year to which such election applies and may be revoked only with the consent
of the IRS.

If a U.S. Holder purchases a Security for an amount that is greater than its
stated redemption price at maturity (i.e., the Security's stated principal
amount), such U.S. Holder will be considered to have purchased the Security
with "amortizable bond premium" equal in amount to such excess. A U.S. Holder
may elect to amortize such premium using a constant yield method over the
remaining term of the Security and may offset interest otherwise required to
be included in respect of the Security during any taxable year by the
amortized amount of such excess for the taxable year. A U.S. Holder generally
will reduce its tax basis in the Security by the amount of any interest offset
taken. Such election, if made, would apply to all debt instruments held by the
U.S. Holder at the beginning of the first taxable year to which such election
applies and to all debt instruments acquired by such U.S. Holder thereafter.
Such election would also be irrevocable once made, unless the U.S. Holder
making such an election obtains the express consent of the IRS to revoke such
election.

ORIGINAL ISSUE DISCOUNT

Prospective investors in the Securities should be aware that if the
principal amount of a Security exceeds the issue price of the Security, as
determined for United States Federal income tax purposes, by an amount that is
equal to or greater than a specified de minimis amount (generally 1/4 of 1% of
the principal amount of the Security multiplied by the number of complete
years from the Security's issue date to its maturity date), then such Security
will be treated as having been issued with original issue discount. 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 and the Securities may be issued with original issue discount.
In general, a U.S. Holder of a Security issued with original issue discount
would be required to include such original issue discount into income as
ordinary interest over the entire term of the Security using a constant yield
method. A U.S. Holder would increase such U.S. Holder's tax basis in a
Security by any original issue discount included in income by such U.S.
Holder. Nevertheless, if a U.S. Holder purchases a Security issued with
original issue discount for an amount equal to the principal amount thereof,
such U.S. Holder would not be required to include any such original issue
discount into income.

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

S-24
<PAGE>

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
aimed at determining whether the issuer of a debt obligation is related to
holders thereof.

Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Security, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.

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.

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.

S-25
<PAGE>

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 Schedule E to the By-Laws 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, New York, New York.

S-26
<PAGE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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.

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

TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... S-2
Summary.................................................................... S-3
Risk Factors............................................................... S-6
Recent Developments........................................................ S-9
Description of Securities.................................................. S-12
The Index.................................................................. S-17
Certain United States Federal Income Tax Considerations ................... S-22
Use of Proceeds............................................................ S-26
Underwriting............................................................... S-26
Validity of Securities..................................................... S-26

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.................................................................... 18
</TABLE>

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

[LOGO]

2,500,000 UNITS

MERRILL LYNCH & CO., INC.

TECHNOLOGY MARKET INDEX TARGET-TERM SECURITIES SM DUE JULY , 2001
"MITTS(R)"

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

PROSPECTUS SUPPLEMENT

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

MERRILL LYNCH & CO.

JUNE , 1996

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

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