<PAGE>
Rule No. 424(b)(5)
Registration No. 333-25255
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT, DATED JUNE 10, 1997
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 28, 1997)
[LOGO]
2,500,000 UNITS
MERRILL LYNCH & CO., INC.
MAJOR 8 EUROPEAN INDEX MARKET INDEX TARGET-TERM SECURITIES DUE JULY , 2002
"MITTS(R)"
($10 PRINCIPAL AMOUNT PER UNIT)
GENERAL:
. Senior unsecured debt securities . Not redeemable prior to maturity
. No payments prior to maturity . Transferable only in whole Units
PAYMENT AT MATURITY:
Principal Amount + Supplemental Redemption Amount
The Supplemental Redemption Amount will be based on the percentage increase,
if any, in the Major 8 European Index, which is a compilation of eight
European equity indices, multiplied by a Participation Rate expected to be
between 110% and 120%. 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.
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INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE(1) DISCOUNTS(1) COMPANY(2)
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Per MITTS........................ $10 $ $
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Total............................ $25,000,000 $ $
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(1) The "Initial Public Offering Price" 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.
We expect that the MITTS will be ready for delivery in book-entry form only
through the facilities of DTC, on or about July , 1997 against payment in
immediately available funds.
---------------------
MERRILL LYNCH & CO.
---------------------
The date of this Prospectus Supplement is July , 1997.
- ---------------------
"MITTS" is a registered service mark and "Market Index Target-Term Securities"
is a service mark owned by Merrill Lynch & Co., Inc.
<PAGE>
STABILIZATION
Certain persons participating in this offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the MITTS. Such
transactions may include stabilizing, the purchase of MITTS to cover syndicate
short positions and the imposition of penalty bids. 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
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TABLE OF CONTENTS
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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 Major 8 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 of a standard debt security of
comparable maturity..................................................... S-7
Your return will not reflect the payment of dividends.................... S-7
Currency exchange rates.................................................. S-8
Uncertain trading market................................................. S-8
Factors affecting trading value of the MITTS............................. S-8
State law limits on interest paid........................................ S-9
The European securities markets.......................................... S-9
Purchases and sales by Merrill Lynch..................................... S-10
Potential conflicts...................................................... S-10
RATIO OF EARNINGS TO FIXED CHARGES........................................ S-10
DESCRIPTION OF SECURITIES................................................. S-11
General.................................................................. S-11
Payment at Maturity...................................................... S-11
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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-16
Determination of Index Multipliers for each Sub-Index..................... S-16
Computation of the Index.................................................. S-16
Sub-Indices............................................................... S-17
Historical Data on the Index.............................................. S-19
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.................... S-23
General................................................................... S-23
U.S. Holders.............................................................. S-23
Hypothetical Table........................................................ S-26
Non-U.S. Holders.......................................................... S-26
Backup Withholding........................................................ S-27
USE OF PROCEEDS............................................................ S-27
UNDERWRITING............................................................... S-28
VALIDITY OF SECURITIES..................................................... S-28
INDEX OF DEFINED TERMS..................................................... S-29
THE PROSPECTUS:
AVAILABLE INFORMATION...................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 2
MERRILL LYNCH & CO., INC................................................... 3
USE OF PROCEEDS............................................................ 3
DESCRIPTION OF DEBT SECURITIES............................................. 4
DESCRIPTION OF DEBT WARRANTS............................................... 8
DESCRIPTION OF CURRENCY WARRANTS........................................... 9
DESCRIPTION OF INDEX WARRANTS.............................................. 10
PLAN OF DISTRIBUTION....................................................... 15
EXPERTS.................................................................... 16
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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 Major 8 European
Index (the "Major 8 Index" or the "Index"), as well as 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 July , 2002 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 the MITTS--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 Major 8
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:
EIV--SIV
$10 X -------- X PR
SIV
but will not be less than zero.
EIV = Ending Index Value
SIV = Starting Index Value
PR = Participation Rate
"ENDING INDEX VALUE" means the average of the values of the Major 8 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 a period prior to the maturity
date of the MITTS, there is a disruption in the trading of the securities
comprising the Major 8 Index.
"STARTING INDEX VALUE" and the value of the Major 8 Index will be set to 100
on the date that the specific terms of the MITTS are determined (the date the
MITTS are priced for the sale to the public).
"PARTICIPATION RATE" means a factor expected to be between 110% and 120%. We
will determine the Participation Rate on the day the MITTS are priced for
initial sale to the public and we will disclose it in the final form of the
Prospectus Supplement delivered to you in connection with sales of the MITTS.
For more specific information about the Supplemental Redemption Amount,
please see the section "Description of Securities" in this Prospectus
Supplement.
We will pay you a Supplement Redemption Amount only if the Ending Index
Value is greater than the Starting Index Value. IF THE ENDING INDEX VALUE IS
LESS THAN, OR EQUAL TO, THE STARTING 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>
Examples
Here are two examples of Supplemental Redemption Amount calculations
assuming a Participation Rate that equals 115% (the midpoint of an expected
offering range of 110% to 120%):
Example 1: Major 8 Index is below Starting Index Value at maturity
Starting Index Value: 100
Hypothetical Ending Index Value: 90
Supplemental Redemption Amount (Per Unit) =
90-100
$10 X ------ X 115% = $0.00 (Supplemental Redemption
100 Amount cannot be less
than zero)
Total payment at maturity (Per Unit) = $10 + $0 = $10
Example 2: Major 8 Index is above Starting Index Value at maturity
Starting Index Value: 100
Hypothetical Ending Index Value: 150
Supplemental Redemption Amount (Per Unit) =
150-100
$10 X ------- X 115% = $5.75
100
Total payment at maturity (Per Unit) = $10 + $5.75 = $15.75
WHO PUBLISHES THE INDEX AND WHAT DOES THE INDEX MEASURE?
The American Stock Exchange (the "AMEX") will publish the Index which
measures the performance of various European stock indices, each a "Sub-
Index". Each Sub-Index measures the performance of certain common stocks in a
designated European country. The publishers of the Sub-Indices use various
methods to select and maintain stocks in a Sub-Index and to calculate the
value of a Sub-Index. Sub-Indices represent common stocks of issuers traded
principally on stock exchanges located in England, Germany, Switzerland,
France, Netherlands, Italy, Spain and Sweden, respectively.
HOW HAS THE MAJOR 8 INDEX PERFORMED HISTORICALLY?
We have calculated the hypothetical values of the Index on the last business
day of each month from January 1993 through May 1997 as if the Major 8 Index
had existed during such periods. We calculated these values on the same basis
that the Index will be calculated in the future.
You can find a table with these values in the section "The Index--Historical
Data on the Index" in the Prospectus Supplement. We have provided this
historical information to help you evaluate the behavior of the Major 8 Index
in various economic environments; however, such hypothetical values based on
prior performance of the Sub-Indices are not necessarily indicative of how the
Index will perform in the future.
WHAT ABOUT TAXES?
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 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 % 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
S-5
<PAGE>
amounts of ordinary income from the MITTS each year: $ in 1997, $ in 1998,
$ in 1999, $ in 2000, $ in 2001, and $ in 2002. However, in 2002, the
amount of ordinary income that you will be required to pay taxes on from
owning a MITTS may be greater or less than $ , depending upon the
Supplemental Redemption Amount, if any, you receive. Also, if the Supplemental
Redemption Amount is less than $ , you may have a loss which you could deduct
against other income you may have in 2002, 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?
We have applied to have the MITTS listed on the AMEX under the symbol "MEM".
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, Merrill Lynch, Pierce, Fenner & Smith Incorporated
("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 to 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 New York Stock Exchange, the American Stock Exchange, 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.,
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.
We will set the Starting Index Value to 100 on the date the MITTS are priced
for initial sale to the public (the "Pricing Date"). If the Ending Index Value
does not exceed the Starting Index Value at maturity, the Supplemental
Redemption Amount will be zero. This will be true even if the value of the
Index was higher than the Starting Index Value at some time during the life of
the MITTS but later falls below the Starting Index Value. If the Supplemental
Redemption Amount is zero, we will pay you only the principal amount of your
MITTS.
We will set the Participation Rate on the Pricing Date. The Participation
Rate is a factor expected to be between 110% and 120%. We will determine the
actual rate on the Pricing Date and disclose it to you in the final Prospectus
Supplement you will receive in connection with your purchase of the MITTS. If
the Ending Index Value exceeds the Starting Index Value, then the
Participation Rate will enhance the amount of the interest payment received at
maturity. However, if the Ending Index Value does not exceed the Starting
Index Value, you will receive 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 consider the effect of factors that affect the time value
of money.
YOUR RETURN WILL NOT REFLECT THE PAYMENT OF DIVIDENDS.
The AMEX calculates the Index by reference to the Sub-Indices which reflect
the prices of the common stocks comprising such Sub-Indices without taking
into consideration the value of dividends paid on those stocks, except in the
case of the Deutscher Aktienindex Sub-Index. The only Sub-Index that reflects
dividends paid on the common stocks underlying such Sub-Index is the Deutscher
Aktienindex. 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 each Sub-Index and received the dividends paid on
those stocks.
S-7
<PAGE>
CURRENCY EXCHANGE RATES.
Although the stocks comprising the Sub-Indices are traded in currencies
other than U.S. dollars and the MITTS are denominated in U.S. dollars, we will
not adjust the Supplemental Redemption Amount for currency exchange rates in
effect at the maturity of the MITTS. The Supplemental Redemption Amount is
based solely upon the percentage increase in the Index. Changes in exchange
rates, however, may reflect changes in the relevant European economies which
may affect the value of the Sub-Indices, and the MITTS.
UNCERTAIN TRADING MARKET.
We have applied to have the MITTS listed on the American Stock Exchange
under the symbol "MEM". 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 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 bullets
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 amount by which the Index exceeds the Starting Index
Value. If you choose to sell your MITTS when the value of the Index
exceeds the Starting 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 Starting Index Value, you
may receive less than the $10 principal amount per Unit of MITTS. In
general, rising dividend rates (i.e., dividends per share) in the
European countries related to the common stocks underlying the Sub-
Indices (each, an "applicable European country") may increase the value
of the Index while falling dividend rates in the applicable European
countries 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. In general, if interest rates in the applicable European
countries increase, we expect that the trading value of the MITTS will
increase. If interest rates in the applicable European countries
decrease, we expect the trading value of the MITTS will decrease.
However, interest rates in the applicable European countries may also
affect the relevant economies and, in turn, the value of the Sub-Indices.
Rising interest rates in the applicable European countries may lower the
value of the Sub-Indices and the MITTS. Falling interest rates in the
applicable European countries may increase the value of the Index and 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.
S-8
<PAGE>
. 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 Sub-
Indices increase, we expect that the value of the MITTS will decrease.
Conversely, if dividend yields on the stock comprising the Sub-Indices
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.
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. 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.
THE EUROPEAN SECURITIES MARKETS.
The underlying stocks that constitute the Sub-Indices have been issued by
companies listed on European exchanges. You should be aware that investments
in securities indexed to the value of the European equity securities involve
certain risks. The European securities markets may be more volatile than U.S.
or other securities markets and may be affected by market developments in
different ways than U.S. or other securities markets. Direct or indirect
government intervention to stabilize a particular European securities market
and cross-shareholdings in European companies on such markets may affect
prices and volume of trading on those markets. Also, there is generally less
publicly available information about European companies than about those U.S.
companies that are subject to the reporting requirements of the U.S.
Securities and Exchange Commission, and European companies are subject to
accounting, auditing and financial reporting standards and requirements that
differ from those applicable to U.S. reporting companies.
Securities prices in Europe may be affected by political, economic,
financial and social factors in Europe. These factors (including the
possibility that recent or future changes in a European country's government,
economic and fiscal policies, the possible imposition of, or changes in,
currency exchange laws or other laws or restrictions applicable to such
European companies or investments in European equity securities and the
possibility of fluctuations in the rate of exchange between currencies) could
negatively affect the European securities markets. Moreover, the relevant
European economies may differ favorably or unfavorably from the U.S. economy
in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resources and self-sufficiency.
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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.
The Calculation Agent is a subsidiary of the Company, the issuer of the
MITTS. 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.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios for earnings to fixed
charges for the periods indicated:
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YEAR ENDED LAST FRIDAY THREE MONTHS
IN DECEMBER ENDED
------------------------ MARCH 28,
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ------------
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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.
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DESCRIPTION OF SECURITIES
GENERAL
The Securities are to be issued as a series of Senior Debt Securities under
the Senior Indenture, referred to as the "1983 Indenture", which is more fully
described in the accompanying Prospectus. The Securities will mature on July
, 2002.
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 a Supplemental Redemption Amount, if any,
all as provided below. If the Ending Index Value does not exceed the Starting
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:
Ending Index Value--
Principal Amount of such Starting Index Value
Security ($10 per Unit) X -------------------- X Participation Rate
Starting Index Value
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The Participation Rate is expected to equal a factor between 110% and 120%
and will be determined on the Pricing Date. The Participation Rate will be set
forth in the final form of the Prospectus Supplement delivered to investors in
connection with sales of the Securities. The Starting Index Value will be set
to 100 on the Pricing Date. 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 New York Stock Exchange and the
American Stock Exchange 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 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-11
<PAGE>
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 2.33% per annum, as more fully described below).
<TABLE>
<CAPTION>
TOTAL AMOUNT PRETAX
PAYABLE AT MATURITY ANNUALIZED PRETAX ANNUALIZED
PERCENTAGE CHANGE PER $10 PRINCIPAL TOTAL RATE OF RATE RATE OF RETURN OF
HYPOTHETICAL ENDING OVER THE STARTING AMOUNT OF RETURN ON OF RETURN ON STOCKS UNDERLYING THE
INDEX VALUE INDEX VALUE SECURITIES(1) THE SECURITIES THE SECURITIES(2) INDEX(2)(3)
- ------------------- ----------------- ------------------- -------------- ----------------- ---------------------
<S> <C> <C> <C> <C> <C>
40 -60% $10.00 0.00% 0.00% -15.53%
50 -50% $10.00 0.00% 0.00% -11.28%
60 -40% $10.00 0.00% 0.00% -7.77%
70 -30% $10.00 0.00% 0.00% -4.76%
80 -20% $10.00 0.00% 0.00% -2.12%
90 -10% $10.00 0.00% 0.00% 0.22%
100(4) 0% $10.00 0.00% 0.00% 2.33%
110 10% $11.15 11.50% 2.19% 4.25%
120 20% $12.30 23.00% 4.18% 6.02%
130 30% $13.45 34.50% 6.02% 7.66%
140 40% $14.60 46.00% 7.71% 9.18%
150 50% $15.75 57.50% 9.29% 10.60%
160 60% $16.90 69.00% 10.77% 11.94%
170 70% $18.05 80.50% 12.17% 13.20%
180 80% $19.20 92.00% 13.48% 14.40%
190 90% $20.35 103.50% 14.73% 15.54%
200 100% $21.50 115.00% 15.91% 16.62%
210 110% $22.65 126.50% 17.04% 17.65%
220 120% $23.80 138.00% 18.12% 18.64%
230 130% $24.95 149.50% 19.15% 19.58%
</TABLE>
- --------
(1) The total amount payable at maturity assumes a Participation Rate which
equals 115% (the midpoint of an expected offering range of 110% to 120%).
(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 Sub-Indices with the allocation of such amount
reflecting the current relative weights of such stocks in the Sub-Indices;
(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 2.33% 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 issue; and (vi) a final Index value equal to
the Ending Index Value. The aggregate dividend yield of the stocks
underlying the Sub-Indices as of June 9, 1997 was approximately 2.33%.
(4) The Starting Index Value will be set to 100 on the Pricing Date.
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 Participation Rate and 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 the occurrence or existence on any Overseas
Index Business Day with respect to a Sub-Index during the one-half hour period
that ends at the regular official weekday time at which trading on the Index
Exchange related to such Sub-Index occurs of any suspension of, or limitation
imposed on, trading (by reason of movements in price exceeding limits
permitted by the relevant exchange or otherwise) on (i) the Index Exchange in
securities that comprise 20% or more of the value of such Sub-Index or (ii)
any exchanges on which futures or options on such Sub-Index are traded in such
option or futures if, in the determination of the Calculation Agent, such
suspension or limitation is material. For the purpose of the foregoing
definition, (i) a limitation on the hours and number of days of trading will
not constitute a Market Disruption Event if it results from an announced
change in the regular hours of the relevant exchange and (ii) a limitation on
trading imposed during the course of a day by reason of movements in price
otherwise exceeding levels permitted by the relevant exchange will constitute
a Market Disruption Event.
"Overseas Index Business Day" means, with respect to any Sub-Index, any day
that is (or, but for the occurrence of a Market Disruption Event, would have
been) a trading day on the relevant Index Exchange or on any exchanges on
which futures or options on such Sub-Index are traded, other than a day on
which trading on any such exchange is scheduled to close prior to its regular
weekday closing time.
"Index Exchange" means, with respect to any Sub-Index, the principal
exchange on which the shares comprising such Sub-Index are traded.
DISCONTINUANCE OF THE INDEX
If the AMEX discontinues publication of the Index and the AMEX or another
entity publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to such Index (any such
index being referred to hereinafter as a "Successor Index"), then, upon the
Calculation Agent's notification of such determination to the Trustee and the
Company, the Calculation Agent will substitute the Successor Index as
calculated by the AMEX or such other entity for the 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 AMEX 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
S-13
<PAGE>
calculate the Index prior to any such discontinuance. If a Successor Index is
selected or the Calculation Agent calculates a value as a substitute for the
Index as described below, such Successor Index or value shall be substituted
for the Index for all purposes, including for purposes of determining whether
a Market Disruption Event exists.
If the AMEX discontinues publication of the 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 % 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.
S-14
<PAGE>
DTC is owned by a number of Participants and by the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Participant, either
directly or indirectly ("Indirect Participants").
Purchases of Securities must be made by or through Participants, which will
receive a credit on the records of DTC. The ownership interest of each actual
purchaser of each Security ("Beneficial Owner") is in turn to be recorded on
the Participants' or Indirect Participants' records. Beneficial Owners will
not receive written confirmation from DTC of their purchase, but Beneficial
Owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the
Participant or Indirect Participant through which the Beneficial Owner entered
into the transaction. Ownership of beneficial interests in such Global
Security will be shown on, and the transfer of such ownership interests will
be effected only through, records maintained by DTC (with respect to interests
of Participants) and on the records of Participants (with respect to interests
of persons held through Participants). The laws of some states may require
that certain purchasers of securities take physical delivery of such
securities in definitive form. Such limits and such laws may impair the
ability to own, transfer or pledge beneficial interests in Global Securities.
So long as DTC, or its nominee, is the registered owner of a Global
Security, DTC or its nominee, as the case may be, will be considered the sole
owner or Holder of the Securities represented by such Global Security for all
purposes under the 1983 Indenture. Except as provided below, Beneficial Owners
in a Global Security will not be entitled to have the Securities represented
by such Global Securities registered in their names, will not receive or be
entitled to receive physical delivery of the Securities in definitive form and
will not be considered the owners or Holders thereof under the 1983 Indenture,
including for purposes of receiving any reports delivered by the Company or
the Trustee pursuant to the 1983 Indenture. Accordingly, each Person owning a
beneficial interest in a Global Security must rely on the procedures of DTC
and, if such Person is not a Participant, on the procedures of the Participant
through which such Person owns its interest, to exercise any rights of a
Holder under the 1983 Indenture. The Company understands that under existing
industry practices, in the event that the Company requests any action of
Holders or that an owner of a beneficial interest in such a Global Security
desires to give or take any action which a Holder is entitled to give or take
under the 1983 Indenture, DTC would authorize the Participants holding the
relevant beneficial interests to give or take such action, and such
Participants would authorize Beneficial Owners owning through such
Participants to give or take such action or would otherwise act upon the
instructions of Beneficial Owners. Conveyance of notices and other
communications by DTC to Participants, by Participants to Indirect
Participants, and by Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
Payment of the Principal Amount and any Supplemental Redemption Amount with
respect to the 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
S-15
<PAGE>
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.
THE INDEX
The value of the Index on any Index Business Day will be calculated and
disseminated by the AMEX. The AMEX will generally calculate and disseminate
the value of the Index based on the most recently reported values of the Sub-
Indices, at approximately 15-second intervals during the AMEX's business hours
and the end of each Index Business Day via the Consolidated Tape Association's
Network B.
"Determination of Index Multiplier for each Sub-Index"
The weighting of each Sub-Index will be determined at the close of business
on the Pricing Date based on its relative market capitalization. The market
capitalization of a stock equals the product of the total number of shares of
such stock outstanding and the price of a share of such stock. The total
market capitalization of the stocks comprising each Sub-Index will be
determined using the most recently available information concerning the number
of shares outstanding for each stock contained in a Sub-Index and the most
recently available price for each such share. Current exchange rates will be
used to translate such market capitalization information into U.S. dollars.
The market capitalizations expressed in U.S. dollars of each Sub-Index will be
totaled (the "Total Market Capitalization"). The weighting of each Sub-Index
will then be determined and will equal the percentage of the market
capitalization for such Sub-Index relative to the Total Market Capitalization.
The Index Multiplier for each Sub-Index will then be calculated and will equal
(i) the weighting for such Sub-Index multiplied by 100, divided by (ii) the
most recently available value of such Sub-Index. The Index Multipliers will be
calculated so that the Index will equal 100.00 on the Pricing Date.
The Index Multiplier for each Sub-Index will remain fixed, except that the
AMEX may adjust such Index Multiplier in the event of a significant change in
how a Sub-Index is calculated. There will be no periodic rebalancing of the
Index to reflect changes in the relative market capitalizations of the Sub-
Indices.
"Computation of the Index"
The Index is calculated by totaling the products of the most recently
available value of each Sub-Index and the Index Multiplier applicable to such
Sub-Index. Since the Sub-Indices are based on stocks traded on stock exchanges
in Europe, once such stock exchanges close and the values of the Sub-Indices
become fixed until such stock exchanges reopen, the value of the Index will be
fixed.
S-16
<PAGE>
"Sub-Indices"
The following table sets forth the name of each Sub-Index, the number of
stocks underlying each Sub-Index, the market capitalization in U.S. dollars of
each Sub-Index, the current weighting of each Sub-Index and the Index
Multiplier:
<TABLE>
<CAPTION>
NUMBER MARKET CURRENT INDEX
SUB-INDEX OF STOCKS CAPITALIZATION(/1/) WEIGHTING(/2/) MULTIPLIER(/3/)
--------- --------- ------------------- -------------- ---------------
(IN BILLIONS)
<S> <C> <C> <C> <C>
Financial Times SE 100
Index.................. 102 U.S.$1,294.4 37.53%
Deutscher Aktienindex... 30 523.6 15.18%
Compagnie des Agents de
Change 40 Index........ 40 374.1 10.85%
Swiss Market Index...... 23 372.8 10.81%
Amsterdam European Op-
tions Exchange Index... 25 349.2 10.13%
Milano Italia Borsa 30
Index.................. 30 194.8 5.65%
Stockholm Options Market
Index.................. 30 169.8 4.92%
IBEX 35................. 35 169.9 4.93%
--- ------------ ------
Total................. 315 U.S.$3,448.6 100.00%
</TABLE>
- --------
(1) As of June 4, 1997.
(2) This is the weighting as of June 4, 1997, the weighting used to determine
the Index Multiplier will depend on the relative market capitalizations on
the Pricing Date.
(3) Index Multipliers will be determined on the Pricing Date and set forth in
the final form of Prospectus Supplement delivered to you in connection
with sales of the Securities.
The following is list of the Sub-Indices and certain information concerning
each such Sub-Index. All disclosure contained in this Prospectus Supplement
regarding the Sub-Indices is derived from publicly available information. The
weight in the Index indicated for each Sub-Index is calculated as of June 4,
1997 in the same method as the weights will be calculated on the Pricing Date
for purposes of determining the Index Multipliers.
FINANCIAL TIMES SE 100 INDEX--"FT-SE 100"
Description of FT-SE 100: The FT-SE 100 is intended to provide an
indication of the pattern of common stock price movement of the 100 common
stocks with the largest market capitalization on the London Stock Exchange.
Publisher: The Financial Times and London Stock Exchange
Required Disclosure: The FTSE 100 is calculated by FTSE International
Limited in conjunction with the Institute of Actuaries and the Faculty of
Actuaries. Merrill Lynch & Co., Inc. has obtained full license from FTSE
International Limited to use its trademark and copyright in the creation of
this Security. FTSE International Limited does not sponsor, endorse or
promote this Security.
DEUTSCHER AKTIENINDEX--"DAX(R)"
Description of DAX: The DAX is total rate of return index measuring the
performance of 30 common stocks on the Frankfurt Stock Exchange selected
based on their market capitalization and trading volume. A total rate of
return index reflects both the price performance of the relevant common
stocks as well as the dividends paid on such common stocks.
Publisher: Deutsche Borse AG
--------
"DAX" is a registered trademark of Deutsche Borse AG.
COMPAGNIE DES AGENTS DE CHANGE 40 INDEX--"CAC 40"
Description of CAC 40: The CAC 40 is intended to provide an indication of
the pattern of common stock price movement of the 40 common stocks with the
largest market capitalization on the Paris Bourse.
S-17
<PAGE>
Publisher: SBF--Paris Bourse
Required Disclosure: "CAC-40" is a registered trademark of the Societe des
Bourses Francaises-Paris Bourse, which designates the index that the SBF-
Paris Bourse calculates and publishes. Authorization to use the index and
the "CAC-40" trademark in connection with the Securities has been granted
by license.
SWISS MARKET INDEX--"SMI"
Description of SMI: The SMI is intended to provide an indication of the
pattern of common stock price movement of common stocks with the largest
market capitalization and greatest liquidity on the Geneva, Zurich and
Basle Stock Exchanges.
Publisher: Swiss Exchange
Required Disclosure: The Securities are not in any way sponsored, endorsed,
sold or promoted by the Swiss Exchange and the Swiss Exchange makes no
warranty or representation whatsoever, express or implied, either as to the
results to be obtained from the use of the SMI index and/or the figure at
which the SMI index stands at any particular time on any particular day
otherwise. The SMI index is compiled and calculated solely by the Swiss
Exchange. However, the Swiss Exchange shall not be liable (whether in
negligence or otherwise) to any person for any error in the SMI index and
the Swiss Exchange shall not be under any obligation to advise any person
of any error therein.
AMSTERDAM EUROPEAN OPTIONS EXCHANGE INDEX--"AEX"
Description of AEX: The AEX is intended to provide an indication of the
pattern of common stock price movement of the 25 common stocks with the
largest market capitalization on the Amsterdam Stock Exchange.
Publisher: AEX--Optiebeurs nv
Required Disclosure: The AEX-Optiebeurs nv has all proprietary rights with
relation to the AEX index. The AEX-Optiebeurs nv in no way sponsors,
endorses or is otherwise involved in the issue and offering of the
Securities. The AEX-Optiebeurs nv disclaims any liability to any party for
any inaccuracy in the data on which the AEX Index is based, for any
mistakes, errors, or omissions in the calculation with the issue and
offering thereof.
MILANO ITALIA BORSA 30 INDEX--"MIB 30"
Description of MIB 30: The MIB 30 is intended to provide an indication of
the pattern of common stock price movement of common stocks with the
largest market capitalization and greatest liquidity on the Italian Stock
Exchange.
Publisher: Consiglio di Borsa
STOCKHOLM OPTIONS MARKET INDEX--"OMX"
Description of OMX: The OMX is intended to provide an indication of the
pattern of common stock price movement of the 30 common stocks with the
largest volume of trading on the Stockholm Stock Exchange.
Publisher: OM Gruppen AB
Required Disclosure: The Securities are not in any way sponsored, endorsed,
sold or promoted by OM Gruppen AB ("OM") and OM makes no warranty or
representation whatsoever, express or implied, either as to the results to
be obtained from the use of the OMX index and/or the figure at which the
said OMX index stands at any particular time on any particular day
otherwise. The OMX index is compiled and calculated solely by an indexer on
behalf of OM. However, OM shall not be liable (whether in negligence or
otherwise) to any person for any error in the OMX index and OM shall not be
under any obligation to advise any person of any error therein.
S-18
<PAGE>
All rights to the trademark OMX, OMX INDEX are vested in OM Gruppen AB
("OM") and are used under a license agreement with OM.
IBEX 35 INDEX
Description of IBEX 35: The IBEX 35 is intended to provide an indication of
the pattern of common stock price movement of the 35 common stocks with the
greatest liquidity continuously traded and quoted on the Joint Stock
Exchange System made up of the Barcelona, Bilbao, Madrid and Valencia stock
exchanges.
Publisher: Sociedad de Bolsas, S.A.
Required Disclosure: Sociedad de Bolsas, S.A. does not warrant in any case
nor for any reason whatsoever: (a) The continuity of the composition of the
IBEX 35 Index exactly as it is today; (b) the continuity of the method for
calculating the IBEX 35 Index exactly as it is calculated today; (c) the
continuity of the calculation, formula and publication of the IBEX 35
Index; (d) the precision, integrity or freedom from errors or mistakes in
the composition and calculation of the IBEX 35 Index; (e) the adequacy of
the IBEX 35 Index for the purposes expected in the issue of the Securities
nor for dealing in the same.
The publisher of each Sub-Index will add or delete stocks due to events such
as the bankruptcy or merger of the issuer of a stock. The publisher of a Sub-
Index may reevaluate the composition of the stocks underlying the Sub-Index at
specified intervals to assure that they still meet the selection criteria or
any ongoing eligibility criteria.
The publisher of a Sub-Index is under no obligation to continue the
calculation and dissemination of such Sub-Index and such publisher may change
the method by which such Sub-Index is calculated. The publishers of the Sub-
Indices are under no obligation to take the needs of the Company or the
holders of the MITTS into consideration in determining, composing or
calculating the Sub-Indices.
HISTORICAL DATA ON THE INDEX
The following table sets forth the hypothetical level of the Index at the
end of each month (the "Historical Month-End Closing Level"), in the period
from January 1993 through May 1997. All historical data presented in the
following table were calculated and are presented as if the Index had existed
during such periods based on weightings for the Sub-Indices determined on June
4, 1997. Not all of the Sub-Indices were calculated and published prior to
January 1993. Such closing levels have been calculated hypothetically on the
same basis that the Index will be calculated in the future. The Historical
Month-End Closing Level was set to 100 on January 29, 1993 to provide an
illustration of past movements of the Historical Month-End Closing Level only.
The Starting Index Value will be set to 100 on the Pricing Date. 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 indication that the Index is more or less
likely to increase or decrease at any time during the term of the Securities.
S-19
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
1993
January.................... 100.00
February................... 104.46
March...................... 103.14
April...................... 104.32
May........................ 106.18
June....................... 108.81
July....................... 112.69
August..................... 121.58
September.................. 117.68
October.................... 122.29
November................... 119.28
December................... 130.33
1994
January.................... 135.47
February................... 129.56
March...................... 127.87
April...................... 132.86
May........................ 125.70
June....................... 120.10
July....................... 126.26
August..................... 128.26
September.................. 121.41
October.................... 120.58
November................... 120.48
December................... 120.52
1995
January.................... 119.69
February................... 118.38
March...................... 117.48
April...................... 123.41
May........................ 126.00
June....................... 124.70
July....................... 129.92
August..................... 130.51
September.................. 130.07
</TABLE>
S-20
<PAGE>
<TABLE>
<CAPTION>
HISTORICAL
MONTH-END
CLOSING LEVEL
-------------
<S> <C>
October.................... 128.39
November................... 130.87
December................... 133.89
1996
January.................... 138.62
February................... 137.82
March...................... 137.45
April...................... 145.18
May........................ 144.06
June....................... 144.46
July....................... 138.54
August..................... 141.66
September.................. 147.96
October.................... 146.63
November................... 154.44
December................... 156.91
1997
January.................... 169.42
February................... 170.39
March...................... 173.03
April...................... 178.55
May........................ 182.76
</TABLE>
S-21
<PAGE>
The following graph sets forth the hypothetical historical performance of the
Index at the end of each month from January 1993 through May 1997. Past
movements of the Index are not necessarily indicative of the future Index
values.
[The graph sets forth the hypothetical month-end closing levels of the Index
from January 1993 through May 1997, with the vertical axis specifying the
month-end closing level of the Index in a range from 0 to 200 in increments of
50 and the horizontal axis specifying the time period in increments of 4 months
from January 1993 to May 1997.]
S-22
<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 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 (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, (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
fiduciaries 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. As used herein, the term "non-U.S. Holder" means a beneficial owner
of a Security that is not a U.S. Holder.
GENERAL
There are no statutory provisions, regulations, published rulings or
judicial decisions addressing or involving the characterization, for United
States Federal income tax purposes, of the Securities or securities with terms
substantially the same as the Securities. However, although the matter is not
free from doubt, under current law, each Security should be treated as a debt
instrument of the Company for United States Federal income tax purposes. The
Company currently intends to treat each Security as a debt instrument of the
Company for United States Federal income tax purposes and, where required,
intends to file information returns with the Internal Revenue Service ("IRS")
in accordance with such treatment, in the absence of any change or
clarification in the law, by regulation or otherwise, requiring a different
characterization of the Securities. Prospective investors in the Securities
should be aware, however, that the IRS is not bound by the Company's
characterization of the Securities as indebtedness and the IRS could possibly
take a different position as to the proper characterization of the Securities
for United States Federal income tax purposes. The following discussion of the
principal United States Federal income tax consequences of the purchase,
ownership and disposition of the Securities is based upon the assumption that
each Security will be treated as a debt instrument of the Company for United
States Federal income tax purposes. If the Securities are not in fact treated
as debt instruments of the Company for United States Federal income tax
purposes, then the United States Federal income tax treatment of the purchase,
ownership and disposition of the Securities could differ from the treatment
discussed below with the result that the timing and character of income, gain
or loss recognized in respect of a Security could differ from the timing and
character of income, gain or loss recognized in respect of a Security had the
Securities in fact been treated as debt instruments of the Company for United
States Federal income tax purposes.
U.S. HOLDERS
On June 11, 1996, the Treasury Department issued final regulations (the
"Final Regulations") concerning the proper United States Federal income tax
treatment of contingent payment debt instruments such as the
S-23
<PAGE>
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 $
per Unit (the "Projected Supplemental Redemption Amount"). This represents an
estimated yield on the Securities equal to % per annum (compounded
semiannually). Accordingly, during the term of the Securities, a U.S. Holder
of a Security will be required to include in income as ordinary interest an
amount equal to the sum of the daily portions of interest on the Security that
are deemed to accrue at this estimated yield for each day during the taxable
year (or portion of the taxable year) on which the U.S. Holder holds such
Security. The amount of interest that will be deemed to accrue in any accrual
period (i.e., generally each six month period during which the Securities are
outstanding) will equal the product of this estimated yield (properly adjusted
for the length of the accrual period) and the Security's adjusted issue price
(as defined below) at the beginning of the accrual period. The daily portions
of interest will be determined by allocating to each day in the accrual period
the ratable portion of the interest that is deemed to accrue during the
accrual period. In general, for these purposes, a Security's adjusted issue
price will equal the Security's issue price (i.e., $10), increased by the
interest previously accrued on the Security. At maturity of a Security, in the
event that the actual Supplemental Redemption Amount, if any, exceeds $ 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 $ 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 $ per
Unit (i.e., the Projected Supplemental Redemption Amount), the excess of $
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 $ 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.
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.
Prospective investors in the Securities should be aware that if a
significant percentage of the total aggregate amount of the Securities
originally issued is sold at a discount from the principal amount thereof,
which is not
S-24
<PAGE>
expected to be the case, then the issue price of the Securities, as determined
for United States Federal income tax purposes, may be less than the principal
amount of the Securities. In such event, if a U.S. Holder purchases a Security
in connection with the original issuance thereof for an amount equal to the
principal amount thereof, the amount of the difference between the principal
amount of the Securities and the issue price thereof generally should be
allocated by the U.S. Holder to daily portions of interest that are deemed to
accrue on each such date as an offset to such interest on each such date. In
addition, on each such date, the U.S. Holder's adjusted tax basis in the
Security will be reduced by the amount treated as an interest offset pursuant
to the foregoing rule. Alternatively, in the event that the issue price of the
Securities, as determined for United States Federal income tax purposes,
equals the principal amount thereof and a U.S. Holder purchases a Security in
connection with the original issuance thereof for an amount that is less than
the principal amount thereof, the amount of the difference between the
principal amount of the Security and the amount paid by the U.S. Holder to
purchase the Security generally should be allocated by the U.S. Holder to
daily portions of interest that are deemed to accrue on each such date as
additional ordinary interest includible in income by the U.S. Holder on each
such date. In such event, on each such date, the U.S. Holder's adjusted tax
basis in the Security will be increased by the amount treated as additional
ordinary interest income. In addition, U.S. Holders purchasing a Security at a
price that differs from the adjusted issue price of the Security as of the
purchase date (e.g., subsequent purchasers) will be subject to special rules
providing for certain adjustments to the foregoing rules and such U.S. Holders
should consult their own tax advisors concerning these rules. Moreover, all
prospective investors in the Securities should consult their own tax advisors
concerning the application of the Final Regulations to their investment in the
Securities. Investors in the Securities may also obtain the projected payment
schedule, as determined by the Company for purposes of the application of the
Final Regulations to the Securities, by submitting a written request for such
information to Merrill Lynch & Co., Inc., Attn: Darryl W. Colletti, Corporate
Secretary's Office, Merrill Lynch & Co., Inc., 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.
S-25
<PAGE>
HYPOTHETICAL TABLE
The following table sets forth the amount of interest that would be deemed
to have accrued with respect to each Unit of the Securities during each
accrual period over an assumed term of five years for the Securities based
upon a hypothetical projected payment schedule for the Securities (including
both a hypothetical Projected Supplemental Redemption Amount and a
hypothetical estimated yield equal to 6.71% per annum (compounded
semiannually)) as determined by the Company for purposes of illustrating the
application of the Final Regulations to the Securities as if the Securities
had been issued on the date hereof. The following table is for illustrative
purposes only. The actual projected payment schedule for the Securities
(including both the actual Projected Supplemental Redemption Amount and the
actual estimated yield) will be determined by the Company on the Pricing Date
and will depend upon actual market interest rates (and thus the Company's
borrowing costs for debt instruments with comparable maturities) as of the
Pricing Date. The actual projected payment schedule for the Securities
(including both the actual Projected Supplemental Redemption Amount and the
actual estimated yield) and the actual tax accrual table will be set forth in
the final form of the Prospectus Supplement delivered to investors in
connection with sales of the Securities.
<TABLE>
<CAPTION>
TOTAL INTEREST
DEEMED TO HAVE
INTEREST DEEMED TO ACCRUED ON
ACCRUE DURING SECURITIES AS OF END
ACCRUAL PERIOD OF ACCRUAL PERIOD
ACCRUAL PERIOD (PER UNIT) (PER UNIT)
-------------- ------------------ --------------------
<S> <C> <C>
June 10, 1997 through December 9,
1997.............................. $0.3355 $0.3355
December 10, 1997 through June 9,
1998.............................. $0.3486 $0.6841
June 10, 1998 through December 9,
1998.............................. $0.3565 $1.0406
December 10, 1998 through June 9,
1999.............................. $0.3705 $1.4111
June 10, 1999 through December 9,
1999.............................. $0.3828 $1.7939
December 10, 1999 through June 9,
2000.............................. $0.3957 $2.1896
June 10, 2000 through December 9,
2000.............................. $0.4089 $2.5985
December 10, 2000 through June 9,
2001.............................. $0.4227 $3.0212
June 10, 2001 through December 9,
2001.............................. $0.4369 $3.4581
December 10, 2001 through June 9,
2002.............................. $0.4515 $3.9096
</TABLE>
- ---------------------
Hypothetical Projected Supplemental Redemption Amount = $3.9096 per Unit.
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.
S-26
<PAGE>
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.
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.
S-27
<PAGE>
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 $ 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 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 they sell 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.
The Underwriter may also impose a penalty bid on certain selling group
members. This means that if the Underwriter purchases Units of the Securities
in the open market to reduce the Underwriter's short position or to stabilize
the price of the Securities, they may reclaim the amount of the selling
concession from the selling group members who sold those Units as part of the
offering.
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. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
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-28
<PAGE>
INDEX OF DEFINED TERMS
<TABLE>
<S> <C>
AEX........................................................................ S-18
AMEX....................................................................... S-5
Beneficial Owner........................................................... S-15
CAC 40..................................................................... S-17
Calculation Agent.......................................................... S-6
Calculation Day............................................................ S-11
Calculation Period......................................................... S-11
Company.................................................................... S-4
DAX........................................................................ S-17
DTC........................................................................ S-4
Ending Index Value......................................................... S-4
Final Regulations.......................................................... S-23
FT-SE 100.................................................................. S-17
Global Securities.......................................................... S-14
Historical Month-End Closing Level......................................... S-19
IBEX 35.................................................................... S-19
Index...................................................................... S-4
Index Business Day......................................................... S-11
Index Exchange............................................................. S-13
Index Multiplier........................................................... S-16
Indirect Participants...................................................... S-15
IRS........................................................................ S-23
Major 8 Index.............................................................. S-4
Market Disruption Event.................................................... S-13
MIB 30..................................................................... S-18
MITTS...................................................................... S-1
MLPF&S..................................................................... S-6
Non-U.S. Holder............................................................ S-23
1983 Indenture............................................................. S-11
OMX........................................................................ S-18
Overseas Index Business Day................................................ S-13
Participants............................................................... S-14
Participation Rate......................................................... S-4
Pricing Date............................................................... S-7
Principal Amount........................................................... S-4
Projected Supplemental Redemption Amount................................... S-24
SEC........................................................................ S-2
SMI........................................................................ S-18
Starting Index Value....................................................... S-4
Sub-Index.................................................................. S-5
Successor Index............................................................ S-13
Supplemental Redemption Amount............................................. S-4
Total Market Capitalization................................................ S-16
Underwriter................................................................ S-28
Unit....................................................................... S-4
U.S. Holder................................................................ S-23
Withholding Agent.......................................................... S-26
</TABLE>
S-29
<PAGE>
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[LOGO]
2,500,000 UNITS
MERRILL LYNCH & CO., INC.
MAJOR 8 EUROPEAN INDEX MARKET
INDEX TARGET-TERM SECURITIES SM
DUE JULY , 2002
"MITTS(R)"
---------------------
PROSPECTUS SUPPLEMENT
---------------------
MERRILL LYNCH & CO.
JUNE , 1997
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