<PAGE>
FILED PURSUANT TO RULE 424(B)(5)
REGISTRATION NO. 333-28537
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 7, 1997)
[LOGO]
16,750,000 UNITS
MERRILL LYNCH & CO., INC.
RUSSELL 2000-REGISTERED TRADEMARK- INDEX* MARKET INDEX TARGET-TERM SECURITIES
DUE SEPTEMBER 30, 2004
"MITTS-REGISTERED TRADEMARK-"
($10 PRINCIPAL AMOUNT PER UNIT)
<TABLE>
<S> <C>
GENERAL:
- - Senior unsecured debt securities - Not redeemable prior to maturity
- - No payments prior to maturity - Transferable only in whole Units
PAYMENT AT MATURITY:
</TABLE>
Principal Amount + Supplemental Redemption Amount
The Supplemental Redemption Amount will be based on the percentage increase, if
any, in the Russell 2000 Index above a benchmark value of 494.36, which exceeds
the closing value of such Index on the date of this Prospectus Supplement by
10%. The Supplemental Redemption Amount may be ZERO, but will not be less than
zero.
BEFORE YOU DECIDE TO INVEST IN THE MITTS, CAREFULLY READ THIS PROSPECTUS
SUPPLEMENT AND PROSPECTUS, ESPECIALLY THE RISK FACTORS BEGINNING ON PAGE S-7.
Neither the SEC nor any state securities commission has approved these
securities or passed upon the adequacy of this Prospectus Supplement or the
attached Prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per MITTS.......................................... $10 $.30 $9.70
Total.............................................. $167,500,000 $5,025,000 $162,475,000
</TABLE>
(1) The "Initial Public Offering Price" and "Underwriting Discount" for any
single transaction to purchase 500,000 Units or more will be $9.90 per Unit
and $.20 per Unit, respectively.
(2) Before deduction of expenses payable by the Company.
--------------------------
We expect that the MITTS will be ready for delivery in book-entry form only
through the facilities of DTC, on or about September 29, 1997 against payment in
immediately available funds.
------------------------
MERRILL LYNCH & CO.
---------------
The date of this Prospectus Supplement is September 23, 1997.
- ------------------------
"MITTS" is a registered service mark and "Market Index Target-Term Securities"
is a service mark owned by Merrill Lynch & Co., Inc.
*The use of, and reference to, the term "Russell 2000 Index" herein has been
consented to by Frank Russell Company.
<PAGE>
STABILIZATION
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S") may engage in
transactions that stabilize, maintain or otherwise affect the price of the
MITTS. Such transactions may include stabilizing and the purchase of MITTS to
cover short positions. For a description of these activities, see
"Underwriting".
REQUIRED LEGEND
We are required to disclose that the Commissioner of Insurance of the State
of North Carolina has not approved or disapproved the offering of the MITTS nor
has the Commissioner determined the accuracy or adequacy of this Prospectus
Supplement or the Prospectus.
CONTENT OF PROSPECTUS
You should rely only on the information contained in this document or in
documents we filed with the Securities and Exchange Commission ("SEC") that we
have referred you to. We have not authorized anyone to provide you with
different information. You should not assume that the information in the
Prospectus or Prospectus Supplement is accurate as of any date other than the
date on the front of this document.
LIMITATIONS ON OFFERS OR SOLICITATIONS
We do not intend this document to be an offer or solicitation:
(A) if used in a jurisdiction in which such offer or solicitation is not
authorized;
(B) if the person making such offer or solicitation is not qualified to
do so; or
(C) if such offer or solicitation is made to anyone to whom it is
unlawful to make such offer or solicitation.
S-2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
THE PROSPECTUS SUPPLEMENT:
SUMMARY INFORMATION--Q&A....................... S-4
What are the MITTS?.......................... S-4
What will I receive at maturity of the
MITTS?..................................... S-4
Who publishes the Index and what does the
Index measure?............................. S-5
How has the Russell 2000 Index performed
historically?.............................. S-5
What about taxes?............................ S-5
Will the MITTS be listed on a stock
exchange?.................................. S-6
What is the role of our subsidiary,
MLPF&S?.................................... S-6
Can you tell me more about the Company?...... S-6
Are there any risks associated with my
investment?................................ S-6
WHERE YOU CAN FIND MORE INFORMATION............ S-7
RISK FACTORS................................... S-7
The Supplemental Redemption Amount........... S-7
Your yield may be lower than the yield on a
standard debt security of comparable
maturity................................... S-7
Your return will not reflect the payment of
dividends.................................. S-7
Uncertain trading market..................... S-7
Factors affecting trading value of the
MITTS...................................... S-8
State law limits on interest paid............ S-9
Small capitalization stocks.................. S-9
Purchases and sales by Merrill Lynch......... S-9
Potential conflicts.......................... S-9
RATIO OF EARNINGS TO FIXED CHARGES............. S-10
DESCRIPTION OF SECURITIES...................... S-11
General...................................... S-11
Payment at Maturity.......................... S-11
<CAPTION>
PAGE
---------
<S> <C>
Hypothetical Returns......................... S-12
Adjustments to the Index; Market Disruption
Events..................................... S-13
Discontinuance of the Index.................. S-13
Events of Default and Acceleration........... S-14
Depository................................... S-14
Same-Day Settlement and Payment.............. S-16
THE INDEX...................................... S-17
General...................................... S-17
Historical Data on the Index................. S-19
License Agreement............................ S-20
CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS............................... S-21
General...................................... S-21
U.S. Holders................................. S-22
Non-U.S. Holders............................. S-24
Backup Withholding........................... S-24
USE OF PROCEEDS................................ S-25
UNDERWRITING................................... S-25
VALIDITY OF SECURITIES......................... S-25
INDEX OF DEFINED TERMS......................... S-26
THE PROSPECTUS:
AVAILABLE INFORMATION.......................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE.................................... 2
MERRILL LYNCH & CO., INC....................... 2
USE OF PROCEEDS................................ 3
DESCRIPTION OF DEBT SECURITIES................. 3
DESCRIPTION OF DEBT
WARRANTS..................................... 8
DESCRIPTION OF CURRENCY WARRANTS............... 9
DESCRIPTION OF INDEX WARRANTS.................. 10
PLAN OF DISTRIBUTION........................... 14
EXPERTS........................................ 15
</TABLE>
S-3
<PAGE>
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from the Prospectus and Prospectus Supplement to help you understand
the MITTS. You should carefully read the Prospectus and Prospectus Supplement to
fully understand the terms of the MITTS, the Russell 2000 Index (the "Russell
2000 Index" or the "Index"), and the tax and other considerations that are
important to you in making a decision about whether to invest in the MITTS. You
should, in particular, carefully review the "Risk Factors" section, which
highlights certain risks, to determine whether an investment in the MITTS is
appropriate for you.
WHAT ARE THE MITTS?
The MITTS are a series of senior debt securities issued by Merrill Lynch &
Co., Inc. (the "Company") and are not secured by collateral. The MITTS will rank
equally with all other unsecured and unsubordinated debt of the Company. The
MITTS mature on September 30, 2004 and do not provide for earlier redemption. We
will make no payments on the MITTS until maturity.
Each "Unit" of MITTS represents $10 principal amount of MITTS. You may
transfer the MITTS only in whole Units. You will not have the right to receive
physical certificates evidencing your ownership except under limited
circumstances. Instead, we will issue the MITTS in the form of a global
certificate, which will be held by The Depository Trust Company ("DTC"), or its
nominee. Direct and indirect participants in DTC will record beneficial
ownership of the MITTS by individual investors. You should refer to the section
"Description of Securities--Depository" in this Prospectus Supplement.
WHAT WILL I RECEIVE AT MATURITY OF THE MITTS?
We have designed the MITTS for investors who want to protect their
investment by receiving at least the principal amount of their investment at
maturity and who also want to participate in possible increases in the Russell
2000 Index. At maturity, you will receive a payment on the MITTS equal to the
sum of two amounts: the "Principal Amount" and the "Supplemental Redemption
Amount".
PRINCIPAL AMOUNT
The Principal Amount per Unit is $10.
SUPPLEMENTAL REDEMPTION AMOUNT
The Supplemental Redemption Amount per Unit will equal:
<TABLE>
<S> <C> <C>
$10 X EIV-BIV
----------
BIV
</TABLE>
but will not be less than zero.
EIV = Ending Index Value
BIV = Benchmark Index Value
"ENDING INDEX VALUE" means the average of the values of the Russell 2000
Index at the close of the market on five business days before the maturity of
the MITTS. We may calculate the Ending Index Value by reference to fewer than
five or even a single day's closing value if, during the period prior to the
maturity date of the MITTS, there is a disruption in the trading of the
securities comprising the Russell 2000 Index.
"BENCHMARK INDEX VALUE" equals 494.36 and was determined as described
herein. The closing value of the Russell 2000 Index on the date of this
Prospectus Supplement was 449.42 (the "Starting Index Value") and the Benchmark
Index Value exceeds the closing value by 10%.
For more specific information about the Supplemental Redemption Amount,
please see the section "Description of Securities" in this Prospectus
Supplement.
The Ending Index Value needs to be more than 10% higher than the Starting
Index Value for any Supplemental Redemption Amount to be paid to you at
maturity. IF THE ENDING INDEX VALUE IS LESS THAN, OR EQUAL TO, THE BENCHMARK
INDEX VALUE, THE SUPPLEMENTAL REDEMPTION AMOUNT WILL BE ZERO. We will pay you
the principal amount of the MITTS regardless of whether any Supplemental
Redemption Amount is payable.
S-4
<PAGE>
<TABLE>
<S> <C>
EXAMPLES
Here are two examples of Supplemental Redemption Amount calculations:
Example 1: Russell 2000 Index is below the Benchmark Index Value at maturity.
- -----------
Starting Index Value: 449.42
Benchmark Index Value: 494.36
Hypothetical Ending Index Value: 470
</TABLE>
<TABLE>
<S> <C> <C> <C>
470 - 494.36
Supplemental Redemption Amount (Per Unit) = $10 X ------------ = -$0.49
494.36 (Supplemental
Redemption
Amount
cannot be
less than zero)
Total payment at maturity (Per Unit) = $10 + $0 = $10
Example 2: Russell 2000 Index is above the Benchmark Index Value at maturity.
- -----------
Starting Index Value: 449.42
Benchmark Index Value: 494.36
Hypothetical Ending Index Value: 750
</TABLE>
<TABLE>
<S> <C> <C> <C>
750 - 494.36
Supplemental Redemption Amount (Per Unit) = $10 X ------------ = $5.17
494.36
Total payment at maturity (Per Unit) = $10 + $5.17 = $15.17
</TABLE>
WHO PUBLISHES THE INDEX AND WHAT DOES THE INDEX MEASURE?
The Russell 2000 Index is published by Frank Russell Company ("FRC") and is
designed to track the performance of 2,000 common stocks of corporations with
small capitalizations relative to other stocks in the U.S. equity market. Market
capitalization is the value of a corporation's stock in the public market
determined by multiplying the number of outstanding shares by the current price
of a share. As of August 31, 1997, the market capitalization of the stocks in
the Russell 2000 Index ranged from approximately $90 million to $2.36 billion,
with the average market capitalization being $540 million. The corporations in
the Russell 2000 Index are domiciled in the U.S. and its territories and their
stocks are traded on the New York Stock Exchange (the "NYSE"), on the American
Stock Exchange (the "AMEX"), or in the over-the-counter market.
HOW HAS THE RUSSELL 2000 INDEX PERFORMED HISTORICALLY?
We have provided a table showing the closing values of the Russell 2000
Index on the last business day of each quarter from 1979 to the present, as
published by FRC.
You can find this table in the section "The Index--Historical Data on the
Index" in this Prospectus Supplement. We have provided this historical
information to help you evaluate the behavior of the Russell 2000 Index in
various economic environments; however, past performance of the Russell 2000
Index is not necessarily indicative of how the Index will perform in the future.
WHAT ABOUT TAXES?
Each year, you will be required to pay taxes on ordinary income from the
MITTS over their term based upon an estimated yield for the MITTS, even though
you will not receive any payments from us
S-5
<PAGE>
until maturity. We have determined this estimated yield, in accordance with
regulations issued by the Treasury Department, solely in order for you to figure
the amount of taxes that you will owe each year as a result of owning a MITTS.
This amount is neither a prediction nor a guarantee of what the actual
Supplemental Redemption Amount will be, or that the actual Supplemental
Redemption Amount will even exceed zero. We have determined that this estimated
yield will equal 6.39% per annum (compounded semiannually).
Based upon this estimated yield, if you pay your taxes on a calendar year
basis and if you buy a MITTS for $10 and hold the MITTS until maturity, you will
be required to pay taxes on the following amounts of ordinary income from the
MITTS each year: $0.1637 in 1997, $0.6585 in 1998, $0.7006 in 1999, $0.7492 in
2000, $0.7967 in 2001, $0.8484 in 2002, $0.9022 in 2003, and $0.7111 in 2004.
However, in 2004, the amount of ordinary income that you will be required to pay
taxes on from owning a MITTS may be greater or less than $0.7111, depending upon
the Supplemental Redemption Amount, if any, you receive. Also, if the
Supplemental Redemption Amount is less than $5.5304, you may have a loss which
you could deduct against other income you may have in 2004, but under current
tax regulations, you would neither be required nor allowed to amend your tax
returns for prior years. For further information, see "Certain United States
Federal Income Tax Considerations" in this Prospectus Supplement.
WILL THE MITTS BE LISTED ON A STOCK EXCHANGE?
The MITTS have been approved for listing on the AMEX under the symbol "RUM".
You should be aware that the listing of the MITTS on the AMEX will not
necessarily ensure that a liquid trading market will be available for the MITTS.
You should review "Risk Factors--Uncertain Trading Market".
WHAT IS THE ROLE OF OUR SUBSIDIARY, MLPF&S?
Our subsidiary, MLPF&S, is the underwriter for the offering and sale of the
MITTS. After the initial offering, MLPF&S intends to buy and sell MITTS to
create a secondary market for holders of the MITTS, and may stabilize or
maintain the market price of the MITTS during the initial distribution of the
MITTS. However, MLPF&S will not be obligated to engage in any of these market
activities or continue them once it has started.
MLPF&S will also be our agent (the "Calculation Agent") for purposes of
calculating the Ending Index Value and the Supplemental Redemption Amount. Under
certain circumstances, these duties could result in a conflict of interest
between MLPF&S's status as a subsidiary of the Company and its responsibilities
as Calculation Agent.
CAN YOU TELL ME MORE ABOUT THE COMPANY?
Merrill Lynch & Co., Inc. is a holding company with various subsidiary and
affiliated companies that provide investment, financing, insurance and related
services on a global basis. For information about the Company see the section
"Merrill Lynch & Co., Inc." in the Prospectus. You should also read the other
documents the Company has filed with the SEC, which you can find by referring to
the section "Where You Can Find More Information" in this Prospectus Supplement.
ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?
Yes, the MITTS are subject to certain risks. Please refer to the section
"Risk Factors" in this Prospectus Supplement.
S-6
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and current reports, proxy statements
and other information with the SEC. Some of these documents are incorporated by
reference in, and form a part of, this Prospectus Supplement and the Prospectus,
as described in the section "Incorporation of Certain Documents by Reference" in
the Prospectus. You may read and copy any document we file by visiting the SEC's
public reference rooms in Washington, D.C. at 450 Fifth Street, Room 1024, N.W.,
Washington, D.C., 20549; or at the SEC's regional offices at 500 West Madison
Street, Suite 400, Chicago, Illinois 60661-2511 and Seven World Trade Center,
New York, New York 10048. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. Copies of our SEC filings can also
be obtained from the SEC's Internet web site at http://www.sec.gov. You may also
read copies of these documents at the offices of the NYSE, the AMEX, the Chicago
Stock Exchange, and the Pacific Exchange.
We will send you copies of our SEC filings, excluding exhibits, at no cost
upon request. Please address your request to Lawrence M. Egan, Jr., Corporate
Secretary's Office, Merrill Lynch & Co., Inc., 100 Church Street, 12th Floor,
New York, New York 10080-6512; telephone number (212) 602-8439.
RISK FACTORS
Your investment in MITTS will involve certain risks. For example, there is
the risk that you might not earn a return on your investment, and the risk that
you will be unable to sell your MITTS prior to their maturity. You should
carefully consider the following discussion of risks before deciding whether an
investment in the MITTS is suitable for you.
THE SUPPLEMENTAL REDEMPTION AMOUNT.
The Benchmark Index Value exceeds the closing value of the Russell 2000
Index (I.E., the Starting Index Value) on the date the MITTS are priced for
initial sale to the public (the "Pricing Date") by 10%. You should be aware that
if the Ending Index Value does not exceed the Starting Index Value at maturity
by more than 10%, the Supplemental Redemption Amount will be ZERO. This will be
true even if the value of the Russell 2000 Index was higher than the Benchmark
Index Value at some time during the life of the MITTS but later falls below the
Benchmark Index Value. If the Supplemental Redemption Amount is zero, we will
pay you only the principal amount of your MITTS.
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF COMPARABLE
MATURITY.
The amount we pay you at maturity may be less than the return you could earn
on other investments. Your yield may be less than the yield you would earn if
you bought a standard senior non-callable debt security of the Company with the
same maturity date. Your investment may not reflect the full opportunity cost to
you when you take into account factors that affect the time value of money.
YOUR RETURN WILL NOT REFLECT THE PAYMENT OF DIVIDENDS.
FRC calculates the Index by reference to the prices of the common stocks
comprising the Index without taking into consideration the value of dividends
paid on those stocks. Therefore, the return you earn on the MITTS, if any, will
not be the same as the return that you would earn if you actually owned each of
the common stocks underlying the Index and received the dividends paid on those
stocks.
UNCERTAIN TRADING MARKET.
The MITTS have been approved for listing on the AMEX under the symbol "RUM".
While there have been a number of issuances of Market Index Target-Term
Securities, trading volumes have varied historically from one transaction to
another and it is therefore impossible to predict how the MITTS will trade. You
cannot assume that a trading market will develop for the MITTS. If such a
trading market does
S-7
<PAGE>
develop, there can be no assurance that there will be liquidity in the trading
market. The development of a trading market for the MITTS will depend on the
financial performance of the Company, and other factors such as the
appreciation, if any, of the value of the Index.
If the trading market for the MITTS is limited, there may be a limited
number of buyers when you decide to sell your MITTS if you do not wish to hold
your investment until maturity. This may affect the price you receive.
FACTORS AFFECTING TRADING VALUE OF THE MITTS.
We believe that the market value of the MITTS will be affected by the value
of the Index and by a number of other factors. Some of these factors are
interrelated in complex ways; as a result, the effect of any one factor may be
offset or magnified by the effect of another factor. The following paragraphs
describe the expected impact on the market value of the MITTS given a change in
a specific factor, assuming all other conditions remain constant.
- INDEX VALUE. We expect that the market value of the MITTS will depend
substantially on the value of the Index relative to the Benchmark Index
Value. If you choose to sell your MITTS when the value of the Index
exceeds the Benchmark Index Value, you may receive substantially less than
the amount that would be payable at maturity based on that Index value
because of the expectation that the Index will continue to fluctuate until
the Ending Index Value is determined. If you choose to sell your MITTS
when the value of the Index is below the Benchmark Index Value, you may
receive less than the $10 principal amount per Unit of MITTS. In general,
rising U.S. dividend rates (I.E., dividends per share) may increase the
value of the Index while falling U.S. dividend rates may decrease the
value of the Index. Political, economic and other developments that affect
the stocks underlying the Index may also affect the value of the Index and
the value of the MITTS.
- INTEREST RATES. Because the MITTS repay, at a minimum, the principal
amount at maturity, we expect that the trading value of the MITTS will be
affected by changes in interest rates. In general, if U.S. interest rates
increase, we expect that the trading value of the MITTS will decrease. If
U.S. interest rates decrease, we expect the trading value of the MITTS
will 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, the MITTS. Falling interest rates may increase the
value of the Index and, thus, may increase the value of the MITTS.
- VOLATILITY OF THE INDEX. Volatility is the term used to describe the size
and frequency of market fluctuations. If the volatility of the Index
increases, we expect that the trading value of the MITTS will increase. If
the volatility of the Index decreases, we expect that the trading value of
the MITTS will decrease.
- TIME REMAINING TO MATURITY. The MITTS may trade at a value above that
which would be expected based on 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 MITTS. However, as the time remaining to maturity of the MITTS
decreases, we expect that this time premium will decrease, lowering the
trading value of the MITTS.
- DIVIDEND YIELDS. If dividend yields on the stocks comprising the Index
increase, we expect that the value of the MITTS will decrease. Conversely,
if dividend yields on the stock comprising the Index decrease, we expect
that the value of the MITTS will increase.
- COMPANY CREDIT RATINGS. Real or anticipated changes in the Company's
credit ratings may affect the market value of the MITTS.
S-8
<PAGE>
We want you to understand that the impact of one of the factors specified
above, such as an increase in interest rates, may offset some or all of any
increase in the trading value of the MITTS attributable to another factor, such
as an increase in the Index value.
In general, assuming all relevant factors are held constant, we expect that
the effect on the trading value of the MITTS of a given change in most of the
factors listed above will be less if it occurs later in the term of the MITTS
than if it occurs earlier in the term of the MITTS except that we expect that
the effect on the trading value of the MITTS of a given increase in the value of
the Index will be greater if it occurs later in the term of the MITTS than if it
occurs earlier in the term of the MITTS.
STATE LAW LIMITS ON INTEREST PAID.
New York State laws govern the 1983 Indenture, as defined below. New York
has certain usury laws that limit the amount of interest that can be charged and
paid on loans, which includes debt securities like the MITTS. Under present New
York law, the maximum rate of interest is 25% per annum on a simple interest
basis. This limit may not apply to debt securities in which $2,500,000 or more
has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws that
regulate the amount of interest that may be charged to and paid by a borrower.
We will promise, for the benefit of the MITTS holders, to the extent permitted
by law, not to voluntarily claim the benefits of any laws concerning usurious
rates of interest.
SMALL CAPITALIZATION STOCKS.
The underlying stocks that constitute the Index (the "Underlying Stocks")
have been issued by corporations domiciled in the U.S. and its territories and
traded on the NYSE, on the AMEX or in the over-the-counter market. If a
Successor Index is substituted for the Index as described below, such Successor
Index would also be based upon stocks issued by corporations domiciled in the
U.S. and its territories and traded on the NYSE, on the AMEX or in the
over-the-counter market. You should be aware that investments in securities
indexed to the value of small capitalization companies involve certain risks. In
general, the stocks comprising the Index have smaller market capitalizations,
less trading liquidity and greater price volatility than stocks in other larger
capitalization indexes which are designed to measure the broad movement of the
U.S. stock markets. We want you to understand that these factors could adversely
affect the value of the Index and the MITTS.
PURCHASES AND SALES BY MERRILL LYNCH.
The Company, MLPF&S and other affiliates of the Company may from time to
time buy or sell the stocks underlying the Index for their own accounts for
business reasons or in connection with hedging the Company's obligations under
the MITTS. These transactions could affect the price of such stocks and the
value of the Index.
POTENTIAL CONFLICTS.
Under certain circumstances, MLPF&S's roles as a subsidiary of the Company
and its responsibilities as Calculation Agent for the MITTS could give rise to
conflicts of interests. You should be aware that because the Calculation Agent
is controlled by the Company, potential conflicts of interest could arise.
S-9
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED LAST FRIDAY IN SIX MONTHS
DECEMBER ENDED
1992 1993 1994 1995 1996 JUNE 27, 1997
---- ---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges................ 1.3 1.4 1.2 1.2 1.2 1.2
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges,
"earnings" consists of earnings from continuing operations before income taxes
and fixed charges. "Fixed charges" consists of interest costs, amortization of
debt expense, preferred stock dividend requirements of majority-owned
subsidiaries, and that portion of rentals estimated to be representative of the
interest factor.
S-10
<PAGE>
DESCRIPTION OF SECURITIES
GENERAL
The Russell 2000 Index Market Target-Term Securities due September 30, 2004,
which are referred to herein as the "MITTS" or the "Securities" are to be issued
as a series of Senior Debt Securities under the Senior Indenture, referred to as
the "1983 Indenture", which is more fully described in the accompanying
Prospectus. The Securities will mature on September 30, 2004.
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
GENERAL
At maturity, a beneficial owner of a Security will be entitled to receive
the principal amount thereof plus the 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.
DETERMINATION OF THE SUPPLEMENTAL REDEMPTION AMOUNT
The Supplemental Redemption Amount for a Security will be determined by the
Calculation Agent and will equal:
<TABLE>
<S> <C> <C>
Principal Amount of such Security ($10 per Unit) X Ending Index Value - Benchmark Index
Value
-----------------------------------------
Benchmark Index Value
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The Benchmark Index Value equals 494.36. The Benchmark Index Value was
determined on the Pricing Date by multiplying the Starting Index Value by a
factor equal to 110%. The Ending Index Value will be determined by 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 occurrences 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 and the AMEX are open for trading and the Index or any
Successor Index, as defined below, 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
S-11
<PAGE>
the Calculation Agent of a manifest error, shall be conclusive for all purposes
and binding on the Company and beneficial owners of the Securities.
HYPOTHETICAL RETURNS
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, (ii) the total rate of return to beneficial owners of the
Securities, (iii) the pretax annualized rate of return to beneficial owners of
Securities, and (iv) the pretax annualized rate of return of an investment in
the stocks underlying the Index (which includes an assumed aggregate dividend
yield of 1.15% per annum, as more fully described below).
<TABLE>
<CAPTION>
TOTAL AMOUNT PRETAX
PAYABLE AT MATURITY TOTAL RATE OF ANNUALIZED PRETAX ANNUALIZED
HYPOTHETICAL PERCENTAGE CHANGE PER $10 PRINCIPAL RETURN ON RATE RATE OF RETURN OF
ENDING OVER THE STARTING AMOUNT OF THE OF RETURN ON STOCKS UNDERLYING THE
INDEX VALUE INDEX VALUE SECURITIES SECURITIES THE SECURITIES(1) INDEX(1)(2)
- ------------------ ----------------- ------------------- ------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
179.77 -60.00% $ 10.00 0.00% 0.00% -11.69%
224.71 -50.00% $ 10.00 0.00% 0.00% -8.61%
269.65 -40.00% $ 10.00 0.00% 0.00% -6.08%
314.59 -30.00% $ 10.00 0.00% 0.00% -3.92%
359.54 -20.00% $ 10.00 0.00% 0.00% -2.03%
404.48 -10.00% $ 10.00 0.00% 0.00% -0.36%
449.42(3) 0.00% $ 10.00 0.00% 0.00% 1.15%
494.36 10.00% $ 10.00 0.00% 0.00% 2.52%
539.30 20.00% $ 10.91 9.09% 1.25% 3.77%
584.25 30.00% $ 11.82 18.18% 2.40% 4.93%
629.19 40.00% $ 12.73 27.27% 3.48% 6.01%
674.13 50.00% $ 13.64 36.36% 4.48% 7.02%
719.07 60.00% $ 14.55 45.45% 5.43% 7.96%
764.01 70.00% $ 15.45 54.55% 6.32% 8.85%
808.96 80.00% $ 16.36 63.64% 7.16% 9.69%
853.90 90.00% $ 17.27 72.73% 7.96% 10.49%
898.84 100.00% $ 18.18 81.82% 8.73% 11.25%
943.78 110.00% $ 19.09 90.91% 9.45% 11.98%
988.72 120.00% $ 20.00 100.00% 10.15% 12.67%
1,033.67 130.00% $ 20.91 109.09% 10.82% 13.33%
1,078.61 140.00% $ 21.82 118.18% 11.46% 13.97%
1,123.55 150.00% $ 22.73 127.27% 12.08% 14.58%
</TABLE>
- ------------------------
(1) The annualized rates of return specified in the preceding table are
calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes (i) an investment of a fixed amount in the
stocks underlying the Index with the allocation of such amount reflecting
the current 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 1.15%
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 term for the Securities from September 29, 1997 to September
30, 2004; and (vi) a final Index value equal to the Ending Index Value. The
aggregate dividend yield of the stocks underlying the Index as of September
23, 1997 was approximately 1.15%.
(3) This is the Starting Index Value.
S-12
<PAGE>
The above figures are for purposes of illustration only. The actual
Supplemental Redemption Amount received by investors and the total and 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".
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:
(a) 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 NYSE or any other self regulatory organization or the SEC 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, or during
the one-half hour period preceding the close of trading on the applicable
exchange, in 20% or more of the stocks which then comprise the Index; or
(b) the suspension or material limitation, in each case, for more than two
hours of trading (whether by reason of movements in price otherwise exceeding
levels permitted by the relevant exchange or otherwise) in (A) futures contracts
related to the Index which are traded on the Chicago Mercantile Exchange or (B)
option contracts related to 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 FRC discontinues publication of the Index and FRC 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 herein 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 FRC or
such other entity for the Index. 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 FRC 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
S-13
<PAGE>
value computed by the Calculation Agent for each Calculation Day in accordance
with the procedures last used to calculate the Index prior to such
discontinuance. If a Successor Index is selected or the Calculation Agent
calculates a value as a substitute for the Index 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 Calculation Agent calculates a value as a substitute for the Index,
"Index Calculation Day" shall mean any day on which the Calculation Agent is
able to calculate such value.
If FRC 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 (a) the determination of the Ending
Index Value and (b) a determination by the Calculation Agent that a Successor
Index is available, the Calculation Agent shall determine the value that would
be used in computing the Supplemental Redemption Amount as described in the
preceding paragraph as if such day were a Calculation 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 the Principal Amount and the
Supplemental Redemption Amount, if any, calculated as though the date of early
repayment were the stated 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 6.39% 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 Cede & Co. (DTC's partnership
nominee). 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.
So long as DTC, or its nominee, is a registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole owner or
Holder of the Securities represented by such Global Security for all purposes
under the 1983 Indenture. Except as provided below, the actual owner of the
Securities represented by a Global Security (the "Beneficial Owner") 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, except in the event that use of the
book-entry
S-14
<PAGE>
system for the Securities is discontinued, and will not be considered the owners
or Holders thereof under the 1983 Indenture, including for purposes of receiving
any reports delivered by the Company or the Trustee pursuant to the 1983
Indenture. Accordingly, each Person owning a beneficial interest in a Global
Security must rely on the procedures of DTC and, if such Person is not a
participant of DTC (a "Participant"), on the procedures of the Participant
through which such person owns its interest, to exercise any rights of a Holder
under the 1983 Indenture. The Company understands that under existing industry
practices, in the event that the Company requests any action of Holders or than
an owner of a beneficial interest in such a Global Security desires to give or
take any action which a Holder is entitled to give or take under the 1983
Indenture, DTC would authorize the Participants holding the relevant beneficial
interests to give or take such action, and such Participants would authorize
Beneficial Owners owning through such Participants to give or take such action
or would otherwise act upon the instructions of Beneficial Owners. Conveyance of
notices and other communications by DTC to Participants, by Participants to
Indirect Participants, as defined below, 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.
If (x) the Depository is at any time unwilling or unable to continue as
Depository and a successor depository is not appointed by the Company within 60
days, (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.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Securities. The Securities
will be issued as fully registered securities registered in the name of Cede &
Co. (DTC's partnership nominee). One or more fully registered Global Security
will be issued for the Securities in the aggregate principal amount of such
issue, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, 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 holds securities that its Participants deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates. Direct
Participants of DTC ("Direct Participants") include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its Direct 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's system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the SEC.
Purchases of Securities under the DTC's system must be made by or through
Direct Participants, which will receive a credit for the Securities on the DTC's
records. The ownership interest of each Beneficial Owner is in turn to be
recorded on the records of Direct Participants and Indirect Participants.
Beneficial Owners will not receive written confirmation from DTC of their
purchase, but Beneficial
S-15
<PAGE>
Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
Participants or Indirect Participants through which such Beneficial Owner
entered into the transaction. Transfers of ownership interests in the Securities
are to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Securities, except in the event that
use of the book-entry system for the Securities is discontinued.
To facilitate subsequent transfers, all Securities deposited with DTC are
registered in the name of DTC's partnership nominee, Cede & Co. The deposit of
Securities with DTC and their registration in the name of Cede & Co. effect no
change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Securities are credited, which may or may
not be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
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.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Securities. Under its usual procedures, DTC mails an Omnibus Proxy to the
Company as soon as possible after the applicable record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Principal, premium, if any, and/or interest, if any, payments on the
Securities will be made in immediately available funds to DTC. DTC's practice is
to credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the Depository's records
unless DTC has reason to believe that it will not receive payment on such date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is 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 Participant and not of DTC, the Trustee or
the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal, premium, if any, and/ or
interest, if any, to DTC is the responsibility of the Company or the Trustee,
disbursement of such payments to Direct Participants shall be the responsibility
of DTC, and disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Securities at any time by giving reasonable notice to the Company
or Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, Security certificates are required to be printed and
delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's system has been
obtained from sources that the Company believes to be reliable, but the Company
takes no responsibility for the accuracy thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Securities will be made by the Underwriter in immediately
available funds. All payments of Adjusted Principal Amount 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
GENERAL
Unless otherwise stated, all information herein on the Index is derived from
FRC or other publicly available sources. Such information reflects the policies
of FRC as stated in such sources and such policies are subject to change by FRC.
FRC is under no obligation to continue to publish the Index and may discontinue
publication of the Index at any time.
The Index is an index calculated, published and disseminated by FRC, and
measures the composite price performance of stocks of 2,000 companies domiciled
in the U.S. and its territories. All 2,000 stocks are traded on either the NYSE
or the AMEX or in the over-the-counter market and form a part of the Russell
3000-Registered Trademark- Index. The Russell 3000 Index is composed of the
3,000 largest U.S. companies as determined by market capitalization and
represents approximately 98% of the investable U.S. equity market. As of August
31, 1997, the average market capitalization of companies included in the Russell
3000 Index was $3.12 billion.
The Index consists of the smallest 2,000 companies included in the Russell
3000 Index and represents approximately 9.51% of the total market capitalization
of the Russell 3000 Index. The Index is designed to track the performance of the
small capitalization segment of the U.S. equity market. As of August 31, 1997,
the market capitalization of the stocks in the Russell 2000 Index ranged from
approximately $90 million to $2.36 billion, with the average market
capitalization being $540 million.
Only common stocks belonging to corporations domiciled in the U.S. and its
territories are eligible for inclusion in the Russell 3000 Index and the Index.
Stocks traded on U.S. exchanges but domiciled in other countries are excluded.
Preferred stock, convertible preferred stock, participating preferred stock,
paired shares, warrants and rights are also excluded. Trust receipts, Royalty
Trusts, limited liability companies, OTC Bulletin Board companies, pink sheets,
closed-end mutual funds, and limited partnerships that are traded on U.S.
exchanges, are also ineligible for inclusion. Real Estate Investment Trusts and
Beneficial Trusts are eligible for inclusion, however. Generally, only one class
of securities of a company is allowed in the Russell 3000 Index, although
exceptions to this general rule have been made where FRC has determined that
each class of securities acts independent of the other.
The primary criteria used to determine the initial list of securities
eligible for the Russell 3000 Index is total market capitalization, which is
defined as the price of the shares times the total number of shares outstanding.
Based on closing values on May 31 of each year, FRC reconstitutes the
composition of the Russell 3000 Index using the then existing market
capitalizations of eligible companies. As of June 30 of each year, the Index is
adjusted to reflect the reconstitution of the Russell 3000 Index for that year.
Publication of the Index began on January 1, 1987.
As a capitalization-weighted index, the Russell 2000 Index reflects changes
in the capitalization (market value) of the component stocks relative to the
capitalization on a base date. The current Index value is calculated by adding
the market values of the Index's component stocks, which are derived by
multiplying the price of each stock by the number of shares outstanding, to
arrive at the total market capitalization of the 2,000 stocks. The total market
capitalization is then divided by a divisor, which represents the "adjusted"
capitalization of the Index on the base date of December 31, 1986. To calculate
the Index, last sale prices will be used for exchange-traded and NASDAQ stocks.
If a component stock is not open for trading, the most recently traded price for
that security will be used in calculating the Index. In order to provide
continuity for the Index's value, the divisor is adjusted periodically to
reflect such events as changes in the number of common shares outstanding for
component stocks, company additions or deletions, corporate restructurings and
other capitalization changes.
All disclosure contained in this Prospectus Supplement regarding the Index,
or its publisher, is derived from publicly available information. All copyrights
and other intellectual property rights relating to the Index are owned by FRC.
FRC has no relationship with the Company or the Securities; it does not sponsor,
S-17
<PAGE>
endorse, authorize, sell or promote the Securities, and has no obligation or
liability in connection with the administration, marketing or trading of the
Securities.
Below is a breakdown of the component stocks of the Index by industry group
as of August 31, 1997:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF INDEX
INDUSTRY COMPANIES MARKET CAPITALIZATION
- ------------------------------------------------------------------------------- ------------- ---------------------
<S> <C> <C>
Technology..................................................................... 258 13.4%
Health Care.................................................................... 214 9.9%
Consumer Discretionary and Services............................................ 376 16.1%
Consumer Staples............................................................... 57 2.8%
Integrated Oils................................................................ 7 0.5%
Other Energy................................................................... 65 3.9%
Materials and Processing....................................................... 196 9.9%
Producer Durables.............................................................. 153 8.6%
Auto and Transportation........................................................ 81 4.1%
Financial Services, including REITS............................................ 424 23.3%
Utilities...................................................................... 108 6.4%
Other.......................................................................... 25 1.3%
----- -----
Total...................................................................... 1,964 100%(1)
</TABLE>
- ------------------------
(1) 100.2% was rounded down to 100%.
Source: FRC.
Note: The Index included fewer than 2,000 stocks (1,964) as of August 31,
1997 due to company attrition (E.G., mergers, bankruptcies, etc.).
As of August 31, 1997, the ten largest holdings in the Index represented
1.9% of the aggregate market capitalization of the Index. Twenty-three of the
1,964 stocks in the Index were also components of the S&P 500 Index. These 23
stocks represented 2.1% of the Russell 2000 Index market capitalization. The
dividend yield on the Index as of September 23, 1997 was 1.15%.
S-18
<PAGE>
HISTORICAL DATA ON THE INDEX
The following table sets forth the closing level of the Index at the end of
each quarter, in the period from March 1979 through June 1997. All historical
data presented in the following table relating to periods prior to January 1,
1987 (the date FRC commenced publication of the Index) are presented as if the
Index had existed during such periods 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
January 1, 1987 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 closing level of the Index during any period set forth
below is not any indication that the Index is more or less likely to decline at
any time during the term of the Securities.
<TABLE>
<CAPTION>
QUARTER-END CLOSING LEVEL
----------------------------------------------
MARCH JUNE SEPTEMBER DECEMBER
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
1979................................................................... 46.94 49.62 54.68 55.91
1980................................................................... 48.27 57.47 69.94 74.80
1981................................................................... 80.25 82.56 67.55 73.67
1982................................................................... 66.21 64.67 70.84 88.90
1983................................................................... 103.77 124.17 117.43 112.27
1984................................................................... 104.10 100.30 105.17 101.49
1985................................................................... 114.92 118.38 112.65 129.87
1986................................................................... 147.63 154.23 134.73 135.00
1987................................................................... 166.79 164.75 170.81 120.42
1988................................................................... 142.15 151.30 149.09 147.36
1989................................................................... 157.90 167.43 178.21 168.31
1990................................................................... 163.64 169.12 126.74 132.20
1991................................................................... 171.01 167.61 180.16 189.94
1992................................................................... 203.69 188.64 192.92 221.01
1993................................................................... 229.21 233.35 252.95 258.59
1994................................................................... 251.06 240.29 256.12 250.36
1995................................................................... 260.77 283.63 310.38 315.97
1996................................................................... 330.77 346.61 346.39 362.61
1997................................................................... 342.56 396.37
</TABLE>
The closing value of the Index on September 23, 1997 was 449.42.
S-19
<PAGE>
The following graph sets forth the historical performance of the Index based
on the closing value thereof at the end of each quarter from March 1979 through
June 1997. Past movements of the Index are not necessarily indicative of future
Index values.
[The graph sets forth the historical quarter-end closing levels of the Index
from March 1979 through June 1997, with the verticle axis specifying the
quarter-end closing level of the Index in a range from 0 to 400 in increments of
50 and the horizontal axis specifying the time period in increments of 3 months
from March 1979 to June 1997.]
LICENSE AGREEMENT
The Index is a trademark of FRC and has been licensed for use by the
Company. The Securities are not sponsored, endorsed, sold or promoted by FRC.
The Securities are not sponsored, endorsed, sold or promoted by FRC. FRC makes
no representation or warranty, express or implied, to the owners of the
Securities or any member of the public regarding the advisability of investing
in securities generally or in the Securities particularly or the ability of the
Index to track general stock market performance or a segment of the same. FRC's
publication of the Index in no way suggests or implies an opinion by FRC as to
the advisability of investment in any or all of the Securities upon which the
Index is based. FRC's only relationship to the Company is the licensing of
certain trademarks, and trade names of FRC and of the Index which is determined,
composed and calculated by FRC without regard to the Company or the Securities.
FRC is not responsible for and has not reviewed the Securities or any associated
literature or publications and FRC makes no representation or warranty express
or implied as to their accuracy or completeness, or otherwise. FRC reserves the
right, at any time and without notice, to alter, amend, terminate or in any way
change the Index. FRC has no obligation or liability in connection with the
administration, marketing or trading of the Securities.
FRC DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR
ANY DATA INCLUDED THEREIN AND FRC SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. FRC MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY THE COMPANY, INVESTORS, OWNERS OF THE
SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA
INCLUDED THEREIN. FRC MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL FRC HAVE ANY LIABILITY FOR ANY SPECIAL,
PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
S-20
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Set forth in full below is the opinion of Brown & Wood LLP, counsel to the
Company, as to certain United States Federal income tax consequences of the
purchase, ownership and disposition of the Securities. Such opinion is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including retroactive changes in effective dates) or possible
differing interpretations. The discussion below deals only with Securities held
as capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, tax-exempt entities,
persons holding Securities in a tax-deferred or tax-advantaged account, or
persons holding Securities as a hedge against currency risks, as a position in a
"straddle" or as part of a "hedging" or "conversion" transaction 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 States 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 (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created or organized in or under the laws of the United States or of any
political subdivision thereof (other than a partnership that is not treated as a
United States person under any applicable Treasury regulations), (c) an estate
the income of which is subject to United States Federal income taxation
regardless of its source, (d) a trust if a court within the United States is
able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust, or (e) 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. Notwithstanding the preceding sentence, to the extent provided in
Treasury regulations, certain trusts in existence on August 20, 1996, and
treated as United States persons prior to such date, that elect to continue to
be treated as United States persons also will be a U.S. Holder. As used herein,
the term "non-U.S. Holder" means a beneficial owner of a Security that is not a
U.S. Holder.
GENERAL
There are no statutory provisions, regulations, published rulings or
judicial decisions addressing or involving the characterization, for United
States Federal income tax purposes, of the Securities or securities with terms
substantially the same as the Securities. However, although the matter is not
free from doubt, under current law, each Security should be treated as a debt
instrument of the Company for United States Federal income tax purposes. The
Company currently intends to treat each Security as a debt instrument of the
Company for United States Federal income tax purposes and, where required,
intends to file information returns with the Internal Revenue Service ("IRS") in
accordance with such treatment, in the absence of any change or clarification in
the law, by regulation or otherwise, requiring a different characterization of
the Securities. Prospective investors in the Securities should be aware,
however, that the IRS is not bound by the Company's characterization of the
Securities as indebtedness and the IRS could possibly take a different position
as to the proper characterization of the Securities for United States Federal
income tax purposes. The following discussion of the principal United States
Federal income tax consequences of the purchase, ownership and disposition of
the Securities is based upon the assumption that each Security will be treated
as a debt instrument of the Company for United States Federal income tax
purposes. If the Securities are not in fact treated as debt instruments of the
Company for United States Federal income tax purposes, then the United States
Federal income tax treatment of the purchase, ownership and disposition of the
Securities could differ from the treatment discussed below with the result that
the timing and character of income, gain or loss recognized in respect
S-21
<PAGE>
of a Security could differ from the timing and character of income, gain or loss
recognized in respect of a Security had the Securities in fact been treated as
debt instruments of the Company for United States Federal income tax purposes.
U.S. HOLDERS
On June 11, 1996, the Treasury Department issued final regulations (the
"Final Regulations") concerning the proper United States Federal income tax
treatment of contingent payment debt instruments such as the Securities, which
apply to debt instruments issued on or after August 13, 1996 and, accordingly,
will apply to the Securities. In general, the Final Regulations cause the timing
and character of income, gain or loss reported 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 prior United States Federal income tax law. Specifically, the
Final Regulations generally require a U.S. Holder of such an instrument to
include future contingent and noncontingent interest payments in income as such
interest accrues based upon a projected payment schedule. Moreover, in general,
under the Final Regulations, any gain recognized by a U.S. Holder on the sale,
exchange, or retirement of a contingent payment debt instrument is treated as
ordinary income and all or a portion of any loss realized could be treated as
ordinary loss as opposed to capital loss (depending upon the circumstances). The
Final Regulations provide no definitive guidance as to whether or not an
instrument is properly characterized as a debt instrument for United States
Federal income tax purposes.
In particular, solely for purposes of applying the Final Regulations to the
Securities, the Company has determined that the projected payment schedule for
the Securities will consist of payment on the maturity date of the principal
amount thereof and a projected Supplemental Redemption Amount equal to $5.5304
per Unit (the "Projected Supplemental Redemption Amount"). This represents an
estimated yield on the Securities equal to 6.39% per annum (compounded
semiannually). Accordingly, during the term of the Securities, a U.S. Holder of
a Security will be required to include in income as ordinary interest an amount
equal to the sum of the daily portions of interest on the Security that are
deemed to accrue at this estimated yield for each day during the taxable year
(or portion of the taxable year) on which the U.S. Holder holds such Security.
The amount of interest that will be deemed to accrue in any accrual period
(I.E., generally each six month period during which the Securities are
outstanding) will equal the product of this estimated yield (properly adjusted
for the length of the accrual period) and the Security's adjusted issue price
(as defined below) at the beginning of the accrual period. The daily portions of
interest will be determined by allocating to each day in the accrual period the
ratable portion of the interest that is deemed to accrue during the accrual
period. In general, for these purposes, a Security's adjusted issue price will
equal the Security's issue price (I.E., $10), increased by the interest
previously accrued on the Security. At maturity of a Security, in the event that
the actual Supplemental Redemption Amount, if any, exceeds $5.5304 per Unit
(I.E., the Projected Supplemental Redemption Amount), a U.S. Holder will be
required to include the excess of the actual Supplemental Redemption Amount over
$5.5304 per Unit (I.E., the Projected Supplemental Redemption Amount) in income
as ordinary interest on the maturity date. Alternatively, in the event that the
actual Supplemental Redemption Amount, if any, is less than $5.5304 per Unit
(I.E., the Projected Supplemental Redemption Amount), the excess of $5.5304 per
Unit (I.E., the Projected Supplemental Redemption Amount) over the actual
Supplemental Redemption Amount will be treated first as an offset to any
interest otherwise includible in income by the U.S. Holder with respect to the
Security for the taxable year in which the maturity date occurs to the extent of
the amount of such includible interest. A U.S. Holder will be permitted to
recognize and deduct, as an ordinary loss that is not subject to the limitations
applicable to miscellaneous itemized deductions, any remaining portion of the
excess of $5.5304 per Unit (I.E., the Projected Supplemental Redemption Amount)
over the actual Supplemental Redemption Amount that is not treated as an
interest offset pursuant to the foregoing rules. U.S. Holders purchasing a
Security at a price that differs from the adjusted issue price of the Security
as of the purchase date (E.G., subsequent purchasers) will be subject to special
rules providing for certain
S-22
<PAGE>
adjustments to the foregoing rules and such U.S. Holders should consult their
own tax advisors concerning these rules.
Upon the sale or exchange of a Security prior to the maturity date, a U.S.
Holder will be required to recognize taxable gain or loss in an amount equal to
the difference, if any, between the amount realized by the U.S. Holder upon such
sale or exchange and the U.S. Holder's adjusted tax basis in the Security as of
the date of disposition. A U.S. Holder's adjusted tax basis in a Security
generally will equal such U.S. Holder's initial investment in the Security
increased by any interest previously included in income with respect to the
Security by the U.S. Holder. Any such taxable gain will be treated as ordinary
income. Any such taxable loss will be treated as ordinary loss to the extent of
the U.S. Holder's total interest inclusions on the Security. Any remaining loss
generally will be treated as long-term or short-term capital loss (depending
upon the U.S. Holder's holding period for the Security). All amounts includible
in income by a U.S. Holder as ordinary interest pursuant to the Final
Regulations will be treated as original issue discount.
All prospective investors in the Securities should consult their own tax
advisors concerning the application of the Final Regulations to their investment
in the Securities. Investors in the Securities may also obtain the projected
payment schedule, as determined by the Company for purposes of the application
of the Final Regulations to the Securities, by submitting a written request for
such information to Merrill Lynch & Co., Inc., Attn: Darryl W. Colletti,
Corporate Secretary's Office, 100 Church Street, 12th Floor, New York, New York
10080-6512.
The projected payment schedule (including both the Projected Supplemental
Redemption Amount and the estimated yield on the Securities) has been determined
solely for United States Federal income tax purposes (I.E., for purposes of
applying the Final Regulations to the Securities), and is neither a prediction
nor a guarantee of what the actual Supplemental Redemption Amount will be, or
that the actual Supplemental Redemption Amount will even exceed zero.
The following table sets forth the amount of interest that will be deemed to
have accrued with respect to each Unit of the Securities during each accrual
period over a term of seven years and one day for the Securities based upon the
projected payment schedule for the Securities as determined by the Company for
purposes of application of the Final Regulations to the Securities:
<TABLE>
<CAPTION>
TOTAL
INTEREST
DEEMED TO
HAVE ACCRUED
INTEREST DEEMED ON SECURITIES
TO AS OF END OF
ACCRUE DURING ACCRUAL
ACCRUAL PERIOD PERIOD
ACCRUAL PERIOD (PER UNIT) (PER UNIT)
- ------------------------------------------------------------------------------- ----------------- -------------
<S> <C> <C>
September 29, 1997 through March 30, 1998...................................... $ 0.3186 $ 0.3186
March 31, 1998 through September 30, 1998...................................... $ 0.3315 $ 0.6501
October 1, 1998 through March 30, 1999......................................... $ 0.3384 $ 0.9885
March 31, 1999 through September 30, 1999...................................... $ 0.3511 $ 1.3396
October 1, 1999 through March 30, 2000......................................... $ 0.3623 $ 1.7019
March 31, 2000 through September 30, 2000...................................... $ 0.3739 $ 2.0758
October 1, 2000 through March 30, 2001......................................... $ 0.3858 $ 2.4616
March 31, 2001 through September 30, 2001...................................... $ 0.3981 $ 2.8597
October 1, 2001 through March 30, 2002......................................... $ 0.4109 $ 3.2706
March 31, 2002 through September 30, 2002...................................... $ 0.4240 $ 3.6946
October 1, 2002 through March 30, 2003......................................... $ 0.4375 $ 4.1321
March 31, 2003 through September 30, 2003...................................... $ 0.4516 $ 4.5837
October 1, 2003 through March 30, 2004......................................... $ 0.4659 $ 5.0496
March 31, 2004 through September 30, 2004...................................... $ 0.4808 $ 5.5304
</TABLE>
- ------------------------
Projected Supplemental Redemption Amount = $5.5304 per Unit.
S-23
<PAGE>
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Security, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Company, a controlled foreign
corporation related to the Company or a bank receiving interest described in
section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended. However,
income allocable to non-U.S. Holders will generally be subject to annual tax
reporting on IRS Form 1042S. For a non-U.S. Holder to qualify for the exemption
from taxation, the last United States payor in the chain of payment prior to
payment to a non-U.S. Holder (the "Withholding Agent") must have received in the
year in which a payment of interest or principal occurs, or in either of the two
preceding calendar years, a statement that (a) is signed by the beneficial owner
of the Security under penalties of perjury, (b) certifies that such owner is not
a U.S. Holder and (c) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Security is
held through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
beneficial owner to the organization or institution. The Treasury Department is
considering implementation of further certification requirements.
Under current law, a Security will not be includible in the estate of a
non-U.S. Holder unless the individual is a direct or indirect 10% or greater
shareholder of the Company or, at the time of such individual's death, payments
in respect of such Security would have been effectively connected with the
conduct by such individual of a trade or business in the United States.
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 (a) the
broker determines that the seller is a corporation or other exempt recipient or
(b) 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 (a) the broker determines that the
seller is an exempt recipient or (b) 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-24
<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 associated with its obligation to pay the Principal Amount and 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 $167,500,000 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. After the initial public
offering, the public offering price may be changed. The Underwriter is offering
the Securities subject to receipt and acceptance and subject to the
Underwriter's right to reject any order in whole or in part.
The underwriting of the Securities will conform to the requirements set
forth in the applicable sections of Rule 2720 of the Conduct Rules of the
National Association of Securities Dealers, Inc.
The Underwriter is permitted to engage in certain transactions that
stabilize the price of the Securities. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Securities.
If the Underwriter creates a short position in the Securities in connection
with the offering, I.E., if it sells more Units of the Securities than are set
forth on the cover page of this Prospectus Supplement, the Underwriter may
reduce that short position by purchasing Units of the Securities in the open
market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Securities. In addition, neither
the Company nor the Underwriter makes any representation that the Underwriter
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
The Underwriter may use this Prospectus Supplement and the accompanying
Prospectus for offers and sales related to market-making transactions in the
Securities. The Underwriter may act as principal or agent in these transactions,
and the sales will be made at prices related to prevailing market prices at the
time of sale.
VALIDITY OF SECURITIES
The validity of the Securities will be passed upon for the Company and for
the Underwriter by Brown & Wood LLP, New York, New York.
S-25
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
PAGE
---------
AMEX...................................................................................................... S-5
Benchmark Index Value..................................................................................... S-4
Beneficial Owner.......................................................................................... S-14
Calculation Agent......................................................................................... S-6
Calculation Day........................................................................................... S-11
Calculation Period........................................................................................ S-11
Company................................................................................................... S-4
Direct Participants....................................................................................... S-15
DTC....................................................................................................... S-4
Ending Index Value........................................................................................ S-4
Final Regulations......................................................................................... S-22
FRC....................................................................................................... S-5
Global Securities......................................................................................... S-14
Index..................................................................................................... S-4
Index Business Day........................................................................................ S-11
Index Calculation Day..................................................................................... S-14
Indirect Participants..................................................................................... S-15
IRS....................................................................................................... S-21
Market Disruption Event................................................................................... S-13
MITTS..................................................................................................... S-1
MLPF&S.................................................................................................... S-2
Non-U.S. Holder........................................................................................... S-21
NYSE...................................................................................................... S-5
1983 Indenture............................................................................................ S-11
Participant............................................................................................... S-15
Pricing Date.............................................................................................. S-7
Principal Amount.......................................................................................... S-4
Projected Supplemental Redemption Amount.................................................................. S-22
Russell 2000 Index........................................................................................ S-4
SEC....................................................................................................... S-2
Securities................................................................................................ S-11
Starting Index Value...................................................................................... S-4
Successor Index........................................................................................... S-13
Supplemental Redemption Amount............................................................................ S-4
Underlying Stocks......................................................................................... S-9
Underwriter............................................................................................... S-25
Unit...................................................................................................... S-4
U.S. Holder............................................................................................... S-21
Withholding Agent......................................................................................... S-24
</TABLE>
S-26
<PAGE>
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[LOGO]
16,750,000 UNITS
MERRILL LYNCH & CO., INC.
RUSSELL 2000-REGISTERED TRADEMARK- INDEX MARKET
INDEX TARGET-TERM SECURITIESSM
DUE SEPTEMBER 30, 2004
"MITTS-REGISTERED TRADEMARK-"
------------------
PROSPECTUS SUPPLEMENT
------------------------
MERRILL LYNCH & CO.
SEPTEMBER 23, 1997
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