FILED PURSUANT TO RULE 424(b)(2)
                                                       REGISTRATION NO. 33-54927

PROSPECTUS SUPPLEMENT
(To Prospectus dated September 1, 1994)
 
                                 $250,000,000

                            [LOGO OF MATTEL, INC.]

                                 MATTEL, INC.
 
                          SERIES A MEDIUM-TERM NOTES
 
                                ---------------
 
                 Due More Than Nine Months From Date of Issue
 
                                ---------------
 
  Mattel, Inc. (the "Company"), may offer from time to time its Series A
Medium-Term Notes, which are issuable in one or more series and may be offered
and sold in the United States. The Series A Medium-Term Notes offered by this
Prospectus Supplement are offered in the United States at an aggregate initial
public offering price of up to U.S. $250,000,000, or the equivalent thereof in
other currencies, including composite currencies such as the European Currency
Unit (the "Specified Currency"). See "Important Currency Exchange
Information." Such aggregate offering price is subject to reduction as a
result of the sale by the Company of certain other Debt Securities. See "Plan
of Distribution." The interest rate on each Note will be either a fixed rate
established by the Company at the date of issue of such Note, which may be
zero in the case of certain Discount Notes, or a floating rate as set forth
therein and specified in the applicable Pricing Supplement. A Fixed Rate Note
may pay a level amount in respect of both interest and principal amortized
over the life of the Note (an "Amortizing Note").
 
  Unless otherwise specified in the applicable Pricing Supplement, interest on
each Fixed Rate Note is payable each November 15 and May 15 and at maturity or
upon earlier redemption or repayment. Interest on each Floating Rate Note is
payable on the date set forth herein and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Amortizing
Notes will pay principal and interest semiannually each November 15 and May
15, or quarterly each February 15, May 15, August 15 and November 15, and at
maturity or upon earlier redemption or repayment. Each Note will mature on any
day more than nine months from the date of issue, as set forth in the
applicable Pricing Supplement. See "Description of Notes." Unless otherwise
specified in the applicable Pricing Supplement, the Notes may not be redeemed
by the Company or the holder prior to maturity and will be issued in fully
registered form in denominations of $1,000 (or, in the case of Notes not
denominated in U.S. dollars, the equivalent thereof in the Specified Currency,
rounded to the nearest 1,000 units of the Specified Currency) or any amount in
excess thereof which is an integral multiple of $1,000 (or, in the case of
Notes not denominated in U.S. dollars, 1,000 units of the Specified Currency).
Any terms relating to Notes being denominated in foreign currencies or
composite currencies will be as set forth in the applicable Pricing
Supplement. Each Note will be represented by either a Global Security
registered in the name of The Depository Trust Company, as Depository (a
"Book-Entry Note"), or by a certificate issued in definitive form (a
"Certificated Note"), as set forth in the applicable Pricing Supplement.
Interests in Global Securities representing Book-Entry Notes will be shown on,
and transfer thereof will be affected only through records maintained by the
Depository (with respect to participant's interests) and its participants.
Book-Entry Notes will not be issuable as Certificated Notes except under the
circumstances described in the Prospectus.
 
                                ---------------
 
 THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
  EXCHANGE  COMMISSION  OR  ANY  STATE SECURITIES  COMMISSION  NOR  HAS  THE
   SECURITIES AND  EXCHANGE COMMISSION  OR ANY STATE  SECURITIES COMMISSION
    PASSED UPON  THE ACCURACY OR  ADEQUACY OF THIS  PROSPECTUS SUPPLEMENT,
     ANY SUPPLEMENT HERETO  OR THE PROSPECTUS. ANY  REPRESENTATION TO THE
      CONTRARY IS A CRIMINAL OFFENSE.
 
                                ---------------
 


                                   PRICE TO               AGENTS'                   PROCEEDS TO
                                   PUBLIC(1)           COMMISSIONS(2)             COMPANY (2)(3)
                                   ---------           --------------             --------------
                                                                  
Per Note....................       100.000%            .125% - .750%             99.875% - 99.250%
Total (4)...................     $250,000,000      $312,500 - $1,875,000    $249,687,500 - $248,125,000

- -------
  (1) Unless otherwise specified in the applicable Pricing Supplement, Notes
      will be sold at 100% of their principal amount. If the Company issues
      any Note at a discount from or at a premium over its principal amount,
      the Price to Public of any Note issued at a discount or premium will be
      set forth in the applicable Pricing Supplement.
  (2) The commission payable to an Agent for each Note sold through such
      Agent shall range from .125% to .750% of the principal amount of such
      Note, provided, however, that commissions with respect to Notes
      maturing in thirty years or greater will be negotiated. The Company may
      also sell Notes to an Agent, as principal, at negotiated discounts, for
      resale to investors and other purchasers.
  (3) Before deducting expenses payable by the Company estimated at $470,000.
  (4) Or the equivalent thereof in other currencies including composite
      currencies.
 
                                ---------------
 
  Offers to purchase the Notes are being solicited from time to time by Morgan
Stanley & Co. Incorporated and CS First Boston Corporation (individually, an
"Agent" and collectively, the "Agents"), on behalf of the Company. The Agents
have agreed to use reasonable efforts to solicit purchases of such Notes. The
Company may also sell Notes to an Agent acting as principal for its own
account for resale to one or more investors and other purchasers at varying
prices related to prevailing market prices at the time of resale or otherwise,
to be determined by such Agent. No termination date for the offering of the
Notes has been established. The Company or an Agent may reject any order in
whole or in part. The Notes will not be listed on any securities exchange, and
there can be no assurance that the Notes offered hereby will be sold or that
there will be a secondary market for the Notes. See "Plan of Distribution."
 
                                ---------------
 
MORGAN STANLEY & CO.                                             CS FIRST BOSTON
    Incorporated
 
September 19, 1994

 
  NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE AGENTS. THIS PROSPECTUS SUPPLEMENT, ANY
PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY DEBT SECURITIES BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
 
                    IMPORTANT CURRENCY EXCHANGE INFORMATION
 
  Purchasers are required to pay for the Notes in U.S. dollars and payments of
principal, premium, if any, and interest on the Notes will also be made in U.S.
dollars, unless the applicable Pricing Supplement provides that purchasers are
instead required to pay for the Notes in a Specified Currency, and/or that
payments of principal, premium, if any, and interest on such Notes will be made
in a Specified Currency. Currently, there are limited facilities in the United
States for the conversion of U.S. dollars into foreign currencies and vice
versa. In addition, most banks do not currently offer non-U.S. dollar
denominated checking or savings account facilities in the United States.
Accordingly, unless otherwise specified in a Pricing Supplement or unless
alternative arrangements are made, payment of principal, premium, if any, and
interest on Notes in a Specified Currency other than U.S. dollars will be made
to an account at a bank outside the United States. See "Description of Notes"
and "Foreign Currency Risks."
 
  If the applicable Pricing Supplement provides for payments of principal,
premium, if any, and interest on a non-U.S. dollar denominated Note to be made
in U.S. dollars or for payments of principal of and interest on a U.S. dollar
denominated Note to be made in a Specified Currency other than U.S. dollars,
the conversion of the Specified Currency into U.S. dollars or U.S. dollars into
the Specified Currency, as the case may be, will be handled by the Exchange
Rate Agent identified in the Pricing Supplement (as defined below). Any Agent
may act, from time to time, as Exchange Rate Agent. The costs of such
conversion will be borne by the holder of a Note through deductions from such
payments.
 
  Reference herein to "U.S. dollars," "U.S. $" or "$" are to the currency of
the United States of America.
 
                               ----------------
 
                              DESCRIPTION OF NOTES
 
  The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
Prospectus, to which reference is hereby made. The particular terms of the
Notes sold pursuant to any pricing supplement (a "Pricing Supplement") will be
described therein. The terms and conditions set forth in "Description of Notes"
will apply to each Note unless otherwise specified in the applicable Pricing
Supplement and in such Note.
 
  If any Note is not to be denominated in U.S. dollars, the applicable Pricing
Supplement will specify the currency or currencies, including composite
currencies such as the European Currency Unit ("ECU"), in which the principal,
premium, if any, and interest, if any, with respect to such Note are to be
paid, along with any other terms relating to the non-U.S. dollar denomination,
including exchange rates for the Specified Currency as against the U.S. dollar
at selected times during the last five years, and any exchange controls
affecting such Specified Currency. See "Foreign Currency Risks."
 
 
                                      S-2

 
GENERAL
 
  The Notes will be issued under the Indenture dated as of August 1, 1994 (the
"Indenture") between the Company and Chemical Trust Company of California, as
trustee (the "Trustee"). The Notes issued under the Indenture will constitute a
series under such Indenture. The Notes will rank pari passu with all other
unsecured and unsubordinated indebtedness of the Company. The Notes may be
issued from time to time in an aggregate principal amount of up to $250,000,000
or the equivalent thereof in one or more foreign or composite currencies,
subject to reduction as a result of the sale by the Company of other Debt
Securities referred to in the accompanying Prospectus. For the purpose of this
Prospectus Supplement, (i) the principal amount of any Discount Note (as
defined below) means the Issue Price (as defined below) of such Note and (ii)
the principal amount of any Note issued in a foreign currency or composite
currency means the U.S. dollar equivalent on the date of issue of the Issue
Price of such Note.
 
  The Notes will mature on any day more than nine months from the date of
issue, as set forth in the applicable Pricing Supplement. Except as may be
provided in the applicable Pricing Supplement, the Notes will be issued only in
fully registered form. Unless otherwise provided in the applicable Pricing
Supplement, Notes will be denominated in Authorized Denominations (as defined
below).
 
  The Notes will be offered on a continuing basis, and each Note will be issued
initially as either a Book-Entry Note or a Certificated Note. Except as set
forth in the Prospectus under "Description of Debt Securities--Payment of
Interest and Exchange--Global Debt Securities and Book-Entry System," Book-
Entry Notes will not be issuable as Certificated Notes. 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.
See "--Book-Entry System" below.
 
  The Notes may be presented for payment of principal and interest, transfer of
the Notes will be registrable and the Notes will be exchangeable at the agency
in The City of New York, maintained by the Company for such purpose; provided
that Book-Entry Notes will be exchangeable only in the manner and to the extent
set forth in the Prospectus under "Description of Debt Securities--Payment of
Interest and Exchange--Global Debt Securities and Book-Entry System." On the
date hereof, the agent for the payment, transfer and exchange of the Notes (the
"Paying Agent") is Chemical Trust Company of California, acting through its
corporate trust office at 300 South Grand Avenue, Los Angeles, California
90071, attention: Paula Oswald, Assistant Vice President, and the agency
maintained by the Trustee in The City of New York for such purposes is the
office of the Paying Agent at the following address: Chemical Trust Company of
California, c/o Chemical Bank, 55 Water Street, North Building, Securities
Window 2nd Floor, New York, New York 10041.
 
  The applicable Pricing Supplement will specify the price (the "Issue Price")
of each Note to be sold pursuant thereto (unless such Note is to be sold at
100% of its principal amount), the interest rate or interest rate formula,
maturity, currency or composite currency and principal amount and any other
terms on which each Note will be issued.
 
  As used herein, the following terms shall have the meanings set forth below:
 
  "Authorized Denominations" means, unless otherwise provided in the applicable
Pricing Supplement, (i) with respect to Notes denominated in U.S. dollars, U.S.
$1,000 or any amount in excess thereof which is an integral multiple of U.S.
$1,000 and (ii) with respect to Notes denominated in foreign or composite
currencies, the equivalent of $1,000 (rounded to an integral multiple of 1,000
units of such Specified Currency), or any amount in excess thereof which is an
integral multiple of 1,000 units of such Specified Currency, as determined by
reference to the noon dollar buying rate in New York City for cable transfers
of such Specified Currency as published by the Federal Reserve Bank of New York
(the "Market Exchange Rate") on the Business Day (as defined below) immediately
preceding the date of issuance; provided, however, that in the case of the
ECU's, the Market Exchange Rate shall be the rate of exchange determined by the
Commission of the European Union (or any successor thereto) as published in the
Official Journal of the European Union, or any successor publication, on the
Business Day immediately preceding the date of issuance.
 
                                      S-3

 
  "Business Day" means (1) any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close in The City of New York, New York, or
Los Angeles, California, and (2)(i) with respect to LIBOR Notes (as defined
below), is also a London Banking Day, (ii) with respect to Notes denominated in
a Specified Currency other than U.S. dollars, Australian dollars, or ECUs, in
the principal financial center of the country of the Specified Currency, (iii)
with respect to Notes denominated in Australian dollars, in Sydney, and (iv)
with respect to Notes denominated in ECUs, in Luxemburg and that is not a non-
ECU clearing day, as determined by the ECU Banking Association in Paris.
 
  "Discount Note" means any Note that provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof pursuant to the Indenture.
 
  An "Interest Payment Date" with respect to any Note shall be a date on which,
under the terms of such Note, regularly scheduled interest shall be payable.
 
  "London Banking Day" means any day on which dealings in deposits in the Index
Currency are transacted in the London interbank market.
 
  The "Record Date" with respect to any Interest Payment Date shall be the date
15 calendar days prior to such Interest Payment Date, whether or not such date
shall be a Business Day.
 
PAYMENT CURRENCY
 
  If the applicable Pricing Supplement provides for payments of principal,
premium, if any, or interest on a non-U.S. dollar denominated Note to be made,
at the option of the holder of such Note, in U.S. dollars, conversion of the
Specified Currency into U.S. dollars will be based on the highest bid quotation
in The City of New York received by the Exchange Rate Agent at approximately
11:00 A.M., New York City time, on the second Business Day preceding the
applicable payment date from three recognized foreign exchange dealers (one of
which may be the Exchange Rate Agent) for the purchase by the quoting dealer of
the Specified Currency for U.S. dollars for settlement on such payment date in
the aggregate amount of the Specified Currency payable to the holders of Notes
and at which the applicable dealer commits to execute a contract. If such bid
quotations are not available, payments will be made in the Specified Currency.
All currency exchange costs will be borne by the holders of Notes by deductions
from such payments.
 
  Except as set forth below, if the principal of, premium, if any, or interest
on, any Note is payable in a Specified Currency other than U.S. dollars and
such Specified Currency is not available to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances
beyond the control of the Company or is no longer used by the government of the
country issuing such currency or for the settlement of transactions by public
institutions within the international banking community, then the Company will
be entitled to satisfy its obligations to holders of the Notes by making such
payments in U.S. dollars on the basis of the Market Exchange Rate on the date
of such payment or, if the Market Exchange Rate is not available on such date,
as of the most recent practicable date. Any payment made under such
circumstances in U.S. dollars where the required payment is in a Specified
Currency other than U.S. dollars will not constitute an Event of Default.
 
  If payment in respect of a Note is required to be made in ECUs and ECUs are
unavailable due to the imposition of exchange controls or other circumstances
beyond the Company's control or are no longer used in the European Monetary
System, then all payments in respect of such Note shall be made in U.S. dollars
until ECUs are again available or so used. The amount of each payment in U.S.
dollars shall be computed on the basis of the equivalent of the ECU in U.S.
dollars, determined as described below, as of the second Business Day prior to
the date on which such payment is due.
 
  The equivalent of the ECU in U.S. dollars as of any date shall be determined
by the Company or the Exchange Rate Agent on the following basis. The component
currencies of the ECU for this purpose (the "Components") shall be the currency
amounts that were components of the ECU as of the last date on which the ECU
was used in the European Monetary System. The equivalent of the ECU in U.S.
dollars shall be
 
                                      S-4

 
calculated by aggregating the U.S. dollar equivalents of the Components. The
U.S. dollar equivalent of each of the Components shall be determined by the
Company or the Exchange Rate Agent on the basis of the most recently available
Market Exchange Rates for such Components.
 
  If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that currency as a Component shall be
combined or subdivided in the same proportion. If two or more Components are
consolidated into a single currency, the amounts of those currencies as
Components shall be replaced by an amount in such single currency equal to the
sum of the appropriate amounts of the consolidated component currencies
expressed in such single currency. If any Component is divided into two or more
currencies, the amount of the original component currency shall be replaced by
the appropriate amounts of such two or more currencies, the sum of which shall
be equal to the amount of the original component currency.
 
  All determinations referred to above made by the Company or its agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on holders of Notes.
 
INTEREST AND PRINCIPAL PAYMENTS
 
  Interest will be payable to the person in whose name the Note is registered
at the close of business on the applicable Record Date; provided that the
interest payable upon maturity, redemption or repayment (whether or not the
date of maturity, redemption or repayment is an Interest Payment Date) will be
payable to the person to whom principal is payable. The initial interest
payment on a Note will be made on the first Interest Payment Date falling after
the date the Note is issued; provided, however, that payments of interest (or,
in the case of an Amortizing Note, principal and interest) on a Note issued
less than 15 calendar days before an Interest Payment Date will be paid on the
next succeeding Interest Payment Date to the holder of record on the Record
Date with respect to such succeeding Interest Payment Date, unless otherwise
specified in the applicable Pricing Supplement.
 
  U.S. dollar payments of interest, other than interest payable at maturity (or
on the date of redemption or repayment, if a Note is redeemed or repaid by the
Company prior to maturity), will be made by check mailed to the address of the
person entitled thereto as shown on the Note register. U.S. dollar payments of
principal, premium, if any, and interest upon maturity, redemption or repayment
will be made in immediately available funds against presentation and surrender
of the Note. Notwithstanding the foregoing, (a) the Depository, as holder of
Book-Entry Notes, shall be entitled to receive payments of interest by wire
transfer of immediately available funds and (b) a holder of U.S. $10,000,000
(or the equivalent) or more in aggregate principal amount of Certificated Notes
having the same Interest Payment Date shall be entitled to receive payments of
interest by wire transfer of immediately available funds upon written request
to the Paying Agent, provided such request is received not later than 15
calendar days prior to the applicable Interest Payment Date. If a Note is
denominated in a Specified Currency other than U.S. dollars, payments of
interest thereon will be made by wire transfer of immediately available funds
to an account maintained by the holder thereof with a bank located outside the
United States if appropriate wire transfer instructions have been received by
the Paying Agent in writing not less than 15 calendar days prior to the
applicable Interest Payment Date. If such wire transfer instructions are not so
received, such interest payments will be made by check payable in such
Specified Currency mailed to the address of the person entitled thereto as such
address shall appear in the Note register.
 
  Unless otherwise specified in the applicable Pricing Supplement, a beneficial
owner of Book-Entry Notes denominated in a Specified Currency electing to
receive payments of principal, premium, if any, or interest in a currency other
than U.S. dollars must notify the participant through which its interest is
held on or prior to the applicable Record Date, in the case of a payment of
interest, and on or prior to the sixteenth day prior to maturity, in the case
of principal or premium of such beneficial owner's election to receive all or a
portion of such payment in a Specified Currency. Such participant must notify
the Depository (as defined below) of such election on or prior to the third
Business Day after such Record Date. The Depository will notify the
 
                                      S-5

 
Paying Agent of such election on or prior to the fifth Business Day after such
Record Date. If complete instructions are received by the participant and
forwarded by the participant to the Depository, and by the Depository to the
Paying Agent, on or prior to such dates, the beneficial owner will receive
payments in the Specified Currency by wire transfer of immediately available
funds to an account maintained by the payee with a bank located outside the
United States; otherwise the beneficial owner will receive payments in U.S.
dollars.
 
  Certain Notes, including Discount Notes, may be considered to be issued with
original issue discount, which must be included in income for United States
federal income tax purposes at a constant rate. See "United States Income Tax
Consequences to Holders--Discount Notes" below. Unless otherwise specified in
the applicable Pricing Supplement, if the principal of any Discount Note is
declared to be due and payable immediately as described under "Description of
Debt Securities--Events of Default" in the Prospectus, the amount of principal
due and payable with respect to such Note shall be limited to the aggregate
principal amount of such Note multiplied by the sum of its Issue Price
(expressed as a percentage of the aggregate principal amount) plus the original
issue discount amortized from the date of issue to the date of declaration,
which amortization shall be calculated using the "interest method" (computed in
accordance with generally accepted accounting principles in effect on the date
of declaration). Special considerations applicable to any such Notes will be
set forth in the applicable Pricing Supplement.
 
FIXED RATE NOTES
 
  Each Fixed Rate Note will bear interest from the date of issuance at the
annual rate stated on the face thereof, except as described below under "--
Extension of Maturity," until the principal thereof is paid or made available
for payment. Unless otherwise specified in the applicable Pricing Supplement,
such interest will be computed on the basis of a 360-day year of twelve 30-day
months. Unless otherwise specified in the applicable Pricing Supplement,
payments of interest on Fixed Rate Notes other than Amortizing Notes will be
made semiannually on each November 15 and May 15 and at maturity or upon any
earlier redemption or repayment. Unless otherwise specified in the applicable
Pricing Supplement, payments of principal of and interest on Amortizing Notes,
which are securities on which payments of principal and interest are made in
equal installments over the life of the security, will be made either quarterly
on each February 15, May 15, August 15 and November 15 or semiannually on each
November 15 and May 15, as set forth in the applicable Pricing Supplement, and
at maturity or upon any earlier redemption or repayment. Payments with respect
to Amortizing Notes will be applied first to interest due and payable thereon
and then to the reduction of the unpaid principal amount thereof. A table
setting forth repayment information in respect of each Amortizing Note will be
provided to the original purchaser and will be available, upon request, to
subsequent holders.
 
  If any Interest Payment Date for any Fixed Rate Note falls on a day that is
not a Business Day, the interest payment shall be made on the next day that is
a Business Day, and no interest on such payment shall accrue for the period
from and after the Interest Payment Date. If the maturity (or date of
redemption or repayment) of any Fixed Rate Note falls on a day that is not a
Business Day, the payment of interest and principal (and premium, if any) will
be made on the next succeeding Business Day, and no interest on such payment
shall accrue for the period from and after the maturity date (or date of
redemption or repayment).
 
  Interest payments for Fixed Rate Notes will include accrued interest from and
including the date of issue or from and including the last date in respect of
which interest has been paid, as the case may be, to, but excluding, the
Interest Payment Date or the date of maturity or earlier redemption or
repayment, as the case may be. The interest rates the Company will agree to pay
on newly issued Fixed Rate Notes are subject to change without notice by the
Company from time to time, but no such change will affect any Fixed Rate Notes
theretofore issued or that the Company has agreed to issue.
 
FLOATING RATE NOTES
 
  Each Floating Rate Note will bear interest from the date of issuance until
the principal thereof is paid or made available for payment at a rate
determined by reference to an interest rate basis or formula (the
 
                                      S-6

 
"Base Rate"), which may be adjusted by a Spread and/or Spread Multiplier (each
as defined below). The applicable Pricing Supplement will designate one or more
of the following Base Rates as applicable to each Floating Rate Note: (a) the
CD Rate (a "CD Rate Note"), (b) the Commercial Paper Rate (a "Commercial Paper
Rate Note"), (c) the Federal Funds Rate (a "Federal Funds Rate Note"), (d)
LIBOR (a "LIBOR Note"), (e) the Prime Rate (a "Prime Rate Note"), (f) the
Treasury Rate (a "Treasury Rate Note"), (g) the CMT Rate (a "CMT Rate Note") or
(h) such other Base Rate or interest rate formula as is set forth in such
Pricing Supplement and in such Floating Rate Note. The "Index Maturity" for any
Floating Rate Note is the period of maturity of the instrument or obligation
from which the Base Rate is calculated and will be specified in the applicable
Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, the interest
rate on each Floating Rate Note will be calculated by reference to the
specified Base Rate (i) plus or minus the Spread, if any, and/or (ii)
multiplied by the Spread Multiplier, if any. The "Spread" is the number of
basis points (one one-hundredth of a percentage point) specified in the
applicable Pricing Supplement to be added to or subtracted from the Base Rate
for such Floating Rate Note, and the "Spread Multiplier" is the percentage
specified in the applicable Pricing Supplement to be applied to the Base Rate
for such Floating Rate Note.
 
  As specified in the applicable Pricing Supplement, a Floating Rate Note may
also have either or both of the following: (i) a maximum limitation, or
ceiling, on the rate of interest which may accrue during any interest period
("Maximum Interest Rate"); and (ii) a minimum limitation, or floor, on the rate
of interest which may accrue during any interest period ("Minimum Interest
Rate"). In addition to any Maximum Interest Rate that may be applicable to any
Floating Rate Note pursuant to the above provisions, the interest rate on a
Floating Rate Note will in no event be higher than the maximum rate permitted
by California law, as the same may be modified by United States law of general
application.
 
  Unless otherwise specified in the applicable Pricing Supplement, the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually (such period being the "Interest Reset
Period" for such Note, and the first day of each Interest Reset Period being an
"Interest Reset Date"), as specified in the applicable Pricing Supplement.
Unless otherwise specified in the Pricing Supplement, the Interest Reset Date
will be, in the case of Floating Rate Notes which reset daily, each Business
Day; in the case of Floating Rate Notes (other than Treasury Rate Notes) which
reset weekly, the Wednesday of each week; in the case of Treasury Rate Notes
which reset weekly, the Tuesday of each week, except as provided below; in the
case of Floating Rate Notes which reset monthly, the third Wednesday of each
month; in the case of Floating Rate Notes which reset quarterly, the third
Wednesday of March, June, September and December; in the case of Floating Rate
Notes which reset semiannually, the third Wednesday of two months of each year,
as specified in the applicable Pricing Supplement; and in the case of Floating
Rate Notes which reset annually, the third Wednesday of one month of each year,
as specified in the applicable Pricing Supplement; provided, however, that (a)
the interest rate in effect from the date of issue to the first Interest Reset
Date with respect to a Floating Rate Note will be the initial interest rate set
forth in the applicable Pricing Supplement (the "Initial Interest Rate") and
(b) unless otherwise specified in the applicable Pricing Supplement, the
interest rate in effect for the ten calendar days immediately prior to
maturity, redemption or repayment will be that in effect on the tenth calendar
day preceding such maturity, redemption or repayment date. If any Interest
Reset Date for any Floating Rate Note would otherwise be a day that is not a
Business Day, such Interest Reset Date shall be postponed to the next
succeeding Business Day, except that in the case of a LIBOR Note, if such
Business Day is in the next succeeding calendar month, such Interest Reset Date
shall be the immediately preceding Business Day.
 
  Except as provided below, unless otherwise specified in the applicable
Pricing Supplement, interest on Floating Rate Notes will be payable: (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset
Date, on the third Wednesday of each month or on the third Wednesday of March,
June, September and December, as specified in the applicable Pricing
Supplement; (ii) in the case of Floating Rate Notes with a quarterly Interest
Reset Date, on the third Wednesday of March, June, September and December;
(iii) in the case of Floating Rate Notes with a semiannual Interest Reset Date,
on the third Wednesday of the two months specified in the applicable Pricing
Supplement; and (iv) in the case of Floating
 
                                      S-7

 
Rate Notes with an annual Interest Reset Date, on the third Wednesday of the
month specified in the applicable Pricing Supplement. If any Interest Payment
Date for any Floating Rate Note would fall on a day that is not a Business Day
with respect to such Floating Rate Note, such Interest Payment Date will be
postponed to the following day that is a Business Day with respect to such
Floating Rate Note, except that, in the case of a LIBOR Note, if such Business
Day is in the next succeeding calendar month, such Interest Payment Date shall
be the immediately preceding day that is a Business Day with respect to such
LIBOR Note, and no interest on such payment shall accrue for the period from
and after the Interest Payment Date. If the maturity date or any earlier
redemption or repayment date of a Floating Rate Note would fall on a day that
is not a Business Day, the payment of principal, premium, if any, and interest
will be made on the next succeeding Business Day, and no interest on such
payment shall accrue for the period from and after such maturity, redemption or
repayment date, as the case may be.
 
  Unless otherwise specified in the applicable Pricing Supplement, interest
payments for Floating Rate Notes (except Floating Rate Notes on which interest
is reset daily or weekly) shall be the amount of interest accrued from and
including the date of issue or from and including the last date to which
interest has been paid to, but excluding, the Interest Payment Date or maturity
date or date of redemption or repayment. In the case of a Floating Rate Note on
which interest is reset daily or weekly, interest payments shall be, unless
otherwise specified in the applicable Pricing Supplement, the amount of
interest accrued from and including the date of issue or from but excluding the
last Record Date to which interest has been paid, as the case may be, to and
including the Record Date immediately preceding such Interest Payment Date,
except that at maturity or earlier redemption or repayment, the interest
payable will include interest accrued to, but excluding, the maturity,
redemption or repayment date, as the case may be.
 
  With respect to a Floating Rate Note, accrued interest shall be calculated by
multiplying the principal amount of such Floating Rate Note by an accrued
interest factor. Such accrued interest factor will be computed by adding the
interest factors calculated for each day in the period for which interest is
being paid. Unless otherwise specified in the applicable Pricing Supplement,
the interest factor for each such day is computed by dividing the interest rate
applicable to such day by 360, in the case of CD Rate Notes, Commercial Paper
Rate Notes, Federal Funds Rate Notes, LIBOR Notes and Prime Rate Notes or by
the actual number of days in the year, in the case of Treasury Rate Notes and
CMT Rate Notes. All percentages used in or resulting from any calculation of
the rate of interest on a Floating Rate Note will be rounded, if necessary, to
the nearest one hundred-thousandth of a percentage point, with five one-
millionths of a percentage point rounded upward, and all dollar amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded to
the nearest cent, with one-half cent rounded upward. The interest rate in
effect on any Interest Reset Date will be the applicable rate as reset on such
date. The interest rate applicable to any other day is the interest rate from
the immediately preceding Interest Reset Date (or, if none, the Initial
Interest Rate).
 
  Unless otherwise stated in the applicable Pricing Supplement, the calculation
agent (the "Calculation Agent") with respect to any issue of Floating Rate
Notes shall be Chemical Trust Company of California. Upon the request of the
holder of any Floating Rate Note, the Calculation Agent will provide the
interest rate then in effect and, if determined, the interest rate that will
become effective on the next Interest Reset Date with respect to such Floating
Rate Note.
 
  The "Interest Determination Date" pertaining to an Interest Reset Date for CD
Rate Notes, Commercial Paper Rate Notes, Federal Funds Rate Notes, CMT Rate
Notes and Prime Rate Notes will be the second Business Day next preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for LIBOR Notes will be the second London Banking Day preceding such
Interest Reset Date. The Interest Determination Date pertaining to an Interest
Reset Date for Treasury Rate Notes will be the day of the week in which such
Interest Reset Date falls on which Treasury bills would normally be auctioned.
Treasury bills are normally sold at auction on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, but such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
 
                                      S-8

 
such Friday will be the Interest Determination Date pertaining to the Interest
Reset Date occurring in the next succeeding week. If an auction falls on a day
that is an Interest Reset Date, such Interest Reset Date will be the next
following Business Day.
 
  Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," where applicable, pertaining to an Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day, or (ii) the Business Day preceding the applicable Interest
Payment Date or Maturity Date, as the case may be.
 
  Interest rates will be determined by the Calculation Agent as follows:
 
 CD Rate Notes
 
  CD Rate Notes will bear interest at the interest rate (calculated with
reference to the CD Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CD Rate Notes and in the applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "CD Rate"
means, with respect to any Interest Determination Date, the rate on such date
for negotiable certificates of deposit having the Index Maturity designated in
the applicable Pricing Supplement as published by the Board of Governors of the
Federal Reserve System in "Statistical Release H.15(519), Selected Interest
Rates," or any successor publication of the Board of Governors of the Federal
Reserve System ("H.15(519)"), under the heading "CDs (Secondary Market)," or,
if not so published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate will be the rate on
such Interest Determination Date for negotiable certificates of deposit of the
Index Maturity designated in the applicable Pricing Supplement as published by
the Federal Reserve Bank of New York in its daily statistical release
"Composite 3:30 P.M. Quotations for U.S. Government Securities" (the "Composite
Quotations") under the heading "Certificates of Deposit." If such rate is not
yet published in either H.15(519) or the Composite Quotations by 3:00 P.M., New
York City time, on the Calculation Date pertaining to such Interest
Determination Date, the CD Rate on such Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such
Interest Determination Date for certificates of deposit in the denomination of
$5,000,000 with a remaining maturity closest to the Index Maturity designated
in the Pricing Supplement of three leading nonbank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York selected by the
Calculation Agent for negotiable certificates of deposit of major United States
money center banks; provided, however, that if the dealers selected as
aforesaid by the Calculation Agent are not quoting as set forth above, the CD
Rate in effect for the applicable period will be the same as the CD Rate for
the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the CD Rate Notes for
which such CD Rate is being determined shall be the Initial Interest Rate).
 
 Commercial Paper Rate Notes
 
  Commercial Paper Rate Notes will bear interest at the interest rate
(calculated with reference to the Commercial Paper Rate and the Spread and/or
Spread Multiplier, if any, and subject to the Minimum Interest Rate and the
Maximum Interest Rate, if any) specified in the Commercial Paper Rate Notes and
in the applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "Commercial
Paper Rate" means, with respect to any Interest Determination Date, the Money
Market Yield (as defined below) of the rate on such date for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement, as
such rate shall be published in H.15(519), under the heading "Commercial
Paper." In the event that such rate is not published by 9:00 A.M., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, then the Commercial Paper Rate shall be the Money Market Yield of the
rate on such Interest Determination Date for commercial paper of the specified
Index Maturity as published in Composite
 
                                      S-9

 
Quotations under the heading "Commercial Paper." If by 3:00 P.M., New York City
time, on such Calculation Date such rate is not yet available in either
H.15(519) or Composite Quotations, then the Commercial Paper Rate shall be the
Money Market Yield of the arithmetic mean of the offered rates as of 11:00
A.M., New York City time, on such Interest Determination Date of three leading
dealers of commercial paper in The City of New York selected by the Calculation
Agent for commercial paper of the specified Index Maturity, placed for an
industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized rating agency; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting offered rates as
mentioned in this sentence, the Commercial Paper Rate in effect for the
applicable period will be the same as the Commercial Paper Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the Commercial Paper Rate Notes
for which such Commercial Paper Rate is being determined shall be the Initial
Interest Rate).
 
  "Money Market Yield" shall be a yield calculated in accordance with the
following formula:
 
                         Money Market Yield =   D X 360   
                                              ----------- X 100
                                              360-(D X M)
 
where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the period for which interest is being calculated.
 
 Federal Funds Rate Notes
 
  Federal Funds Rate Notes will bear interest at the interest rate (calculated
with reference to the Federal Funds Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Federal Funds Rate Notes and in the
applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, the "Federal
Funds Rate" means, with respect to any Interest Determination Date, the rate on
such date for Federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)," or, if not so published by 9:00 A.M., New York
City time, on the Calculation Date pertaining to such Interest Determination
Date, the Federal Funds Rate will be the rate on such Interest Determination
Date as published in the Composite Quotations under the heading "Federal
Funds/Effective Rate." If such rate is not yet published in either H.15(519) or
the Composite Quotations by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, the Federal Funds Rate for
such Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates for the last transaction in
overnight Federal funds, as of 9:00 A.M., New York City time, on such Interest
Determination Date, arranged by three leading brokers of Federal funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if the brokers selected as aforesaid by the Calculation
Agent are not quoting as set forth above, the Federal Funds Rate in effect for
the applicable period will be the same as the Federal Funds Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the Federal Funds Rate Notes for
which such Federal Funds Rate is being determined shall be the Initial Interest
Rate).
 
 LIBOR Notes
 
  LIBOR Notes will bear interest at the interest rate (calculated with
reference to LIBOR and the Spread and/or Spread Multiplier, if any, and subject
to the Minimum Interest Rate and the Maximum Interest Rate, if any) specified
in the LIBOR Notes and in the applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "LIBOR" for
each Interest Determination Date will be determined by the Calculation Agent as
follows:
 
    (i) As of the Interest Determination Date, LIBOR will be either: (a) if
  "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
  arithmetic mean of the offered rates (unless the
 
                                      S-10

 
  specified Designated LIBOR Page (as defined below) by its terms provides
  only for a single rate, in which case such single rate shall be used) for
  deposits in the Index Currency having the Index Maturity designed in the
  applicable Pricing Supplement, commencing on such Interest Determination
  Date, that appear on the Designated LIBOR Page as of 11:00 A.M., London
  time, on that Interest Determination Date, if at least two such offered
  rates appear (unless, as aforesaid, only a single rate is required) on such
  Designated LIBOR Page, or (b) if "LIBOR Telerate" is specified in the
  applicable Pricing Supplement, the rate for deposits in the Index Currency
  having the Index Maturity designated in the applicable Pricing Supplement,
  commencing on such Interest Determination Date, that appears on the
  Designated LIBOR Page as of 11:00 A.M., London time, on that Interest
  Determination Date. If fewer than two offered rates appear (if "LIBOR
  Reuters" is specified in the applicable Pricing Supplement), or no rate
  appears (if "LIBOR Telerate" is specified in the applicable Pricing
  Supplements), LIBOR in respect of the related Interest Determination Date
  will be determined as if the parties had specified the rate described in
  clause (ii) below.
 
    (ii) With respect to an Interest Determination Date on which fewer than
  two offered rates appear (if "LIBOR Reuters" is specified in the applicable
  Pricing Supplement) or no rate appears (if "LIBOR Telerate" is specified in
  the applicable Pricing Supplement), the Calculation Agent will request the
  principal London offices of each of four major reference banks in the
  London interbank market, as selected by the Calculation Agent, to provide
  the Calculation Agent with its offered quotation for deposits in the Index
  Currency for the period of the Index Maturity designated in the applicable
  Pricing Supplement, commencing on the second London Banking Day immediately
  following such Interest Determination Date, to prime banks in the London
  interbank market at approximately 11:00 A.M., London time, on such Interest
  Determination Date and in a principal amount of not less than $1,000,000
  (or the equivalent in the Index Currency, if the Index Currency is not the
  U.S. dollar) that is representative for a single transaction in such Index
  Currency in such market at such time. If at least two such quotations are
  provided, LIBOR determined on such Interest Determination Date will be the
  arithmetic mean of such quotations. If fewer than two quotations are
  provided, LIBOR determined on such Interest Determination Date will be the
  arithmetic mean of the rates quoted at approximately 11:00 A.M. (or such
  other time specified in the applicable Pricing Supplement), in the
  applicable principal financial center for the country of the Index Currency
  on such Interest Determination Date, by three major banks in such principal
  financial center selected by the Calculation Agent for loans in the Index
  Currency to leading European banks, having the Index Maturity designated in
  the applicable Pricing Supplement and in a principal amount of not less
  than $1,000,000 commencing on the second London Banking Day immediately
  following such Interest Determination Date (or the equivalent in the Index
  Currency, if the Index Currency is not the U.S. dollar) that is
  representative for a single transaction in such Index Currency in such
  market at such time; provided, however, that if the banks so selected by
  the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
  in effect for the applicable period will be the same as LIBOR for the
  immediately preceding Interest Reset Period (or, if there was no such
  Interest Reset Period, the rate of interest payable on the LIBOR Notes for
  which such LIBOR is being determined shall be the Initial Interest Rate).
 
  "Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be U.S. dollars.
 
  "Designated LIBOR Page" means either (a) if "LIBOR Reuters" is designated in
the applicable Pricing Supplement, the display on the Reuters Monitor Money
Rates Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
designated in the applicable Pricing Supplement, the display on the Dow Jones
Telerate Service for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency. If neither LIBOR Reuters nor
LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR for the
applicable Index Currency will be determined as if LIBOR Telerate (and, if the
U.S. dollar is the Index Currency, Page 3750) had been specified.
 
                                      S-11

 
 Prime Rate Notes
 
  Prime Rate Notes will bear interest at the interest rate (calculated with
reference to the Prime Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Prime Rate Notes and in the applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, "Prime Rate"
means, with respect to any Interest Determination Date, the rate set forth in
H.15(519) for such date opposite the caption "Bank Prime Loan." If such rate is
not yet published by 9:00 A.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Prime Rate for such
Interest Determination Date will be the arithmetic mean of the rates of
interest publicly announced by each bank named on the Reuters Screen NYMF Page
(as defined below) as such bank's prime rate or base lending rate as in effect
for such Interest Determination Date as quoted on the Reuters Screen NYMF Page
on such Interest Determination Date, or, if fewer than four such rates appear
on the Reuters Screen NYMF Page for such Interest Determination Date, the rate
shall be the arithmetic mean of the prime rates quoted on the basis of the
actual number of days in the year divided by 360 as of the close of business on
such Interest Determination Date by at least two of the three major money
center banks in The City of New York selected by the Calculation Agent from
which quotations are requested. If fewer than two quotations are provided, the
Prime Rate shall be calculated by the Calculation Agent and shall be determined
as the arithmetic mean on the basis of the prime rates in The City of New York
by the appropriate number of substitute banks or trust companies organized and
doing business under the laws of the United States, or any State thereof, in
each case having total equity capital of at least U.S. $500 million and being
subject to supervision or examination by federal or state authority, selected
by the Calculation Agent to quote such rate or rates; provided, however, that
if the banks or trust companies selected as aforesaid by the Calculation Agent
are not quoting as set forth above, the "Prime Rate" in effect for the
applicable period will be the same as the Prime Rate for the immediately
preceding Interest Reset Period (or, if there was no such Interest Reset
Period, the rate of interest payable on the Prime Rate Notes for which such
Prime Rate is being determined shall be the Initial Interest Rate). "Reuters
Screen NYMF Page" means the display designated as Page "NYMF" on the Reuters
Monitor Money Rates Services (or such other page as may replace the NYMF Page
on that service for the purpose of displaying prime rates or base lending rates
of major United States banks) .
 
 Treasury Rate Notes
 
  Treasury Rate Notes will bear interest at the interest rate (calculated with
reference to the Treasury Rate and the Spread and/or Spread Multiplier, if any,
and subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the Treasury Rate Notes and in the applicable Pricing Supplement.
 
  Unless otherwise specified in the applicable Pricing Supplement, the
"Treasury Rate" means, with respect to any Interest Determination Date, the
rate for the auction held on such date of direct obligations of the United
States ("Treasury Bills") having the Index Maturity designated in the
applicable Pricing Supplement, as published in H.15(519) under the heading
"Treasury Bills--auction average (investment)" or, if not so published by 9:00
A.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the auction average rate on such Interest Determination
Date (expressed as a bond equivalent, on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. In the event that the results of
the auction of Treasury Bills having the Index Maturity designated in the
applicable Pricing Supplement are not published or reported as provided above
by 3:00 P.M., New York City time, on such Calculation Date or if no such
auction is held on such Interest Determination Date, then the Treasury Rate
shall be calculated by the Calculation Agent and shall be a yield to maturity
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) calculated using the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Interest Determination Date, of three leading primary United
States government securities dealers selected by the
 
                                      S-12

 
Calculation Agent for the issue of Treasury Bills with a remaining maturity
closest to the Index Maturity designated in the applicable Pricing Supplement;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting bid rates as mentioned in this sentence, the Treasury
Rate for such Interest Reset Date will be the same as the Treasury Rate for the
immediately preceding Interest Reset Period (or, if there was no such Interest
Reset Period, the rate of interest payable on the Treasury Rate Notes for which
the Treasury Rate is being determined shall be the Initial Interest Rate).
 
 CMT Rate Notes
 
  CMT Rate Notes will bear interest at the interest rate (calculated with
reference to the CMT Rate and the Spread and/or Spread Multiplier, if any, and
subject to the Minimum Interest Rate and the Maximum Interest Rate, if any)
specified in the CMT Rate Notes and in the applicable Pricing Supplement.
 
  Unless otherwise indicated in an applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date, the rate displayed for
the Index Maturity designated in such CMT Rate Note on Telerate Page 7055 for
"Daily Treasury Constant Maturities and Money Markets/Federal Reserve Board
Release H.15 Monday's Approx. 3:45 P.M. EDT," for the applicable Interest
Determination Date (or such other page as may replace that page on such service
for the purpose of displaying rates or prices comparable to the CMT Rate, as
determined by the Calculation Agent). If such rate is not available by 3:00
P.M., New York City time, on the applicable Calculation Date, then the CMT Rate
for such Interest Determination Date shall be the bond equivalent yield to
Maturity of the arithmetic mean (as calculated by the Calculation Agent) of the
secondary market bid rates, as of 3:00 P.M., New York City time, on the
applicable Interest Determination Date, reported, according to their written
records, by three leading primary United States government securities dealers
in The City of New York (each, a "Reference Dealer") selected by the
Calculation Agent, for the most recently issued direct noncallable fixed rate
Treasury Bills with an original Maturity approximately equal to the applicable
Index Maturity; provided, however, that if the dealers selected as aforesaid by
the Calculation Agent are not quoting bid rates as mentioned in this sentence,
the CMT Rate for such Interest Reset Date will be the same as the CMT Rate for
the immediately preceding Interest Reset Period (or, if there was no such
Interest Reset Period, the rate of interest payable on the CMT Rate Notes for
which the CMT Rate is being determined shall be the Initial Interest Rate).
 
RENEWABLE NOTES
 
  The Company may also issue from time to time variable rate renewable notes
(the "Renewable Notes") that will bear interest at the interest rate
(calculated with reference to a Base Rate and the Spread and/or Spread
Multiplier, if any, and subject to the Minimum Interest Rate and the Maximum
Interest Rate, if any) specified in the Renewable Notes and in the applicable
Pricing Supplement.
 
  The Renewable Notes will mature on an Interest Payment Date as specified in
the applicable Pricing Supplement (the "Initial Maturity Date"), unless the
maturity of all or any portion of the principal amount thereof is extended in
accordance with the procedures described below. On the Interest Payment Dates
in November 15 and May 15 in each year (unless different Interest Payment Dates
are specified in the applicable Pricing Supplement) (each such Interest Payment
Date, an "Election Date"), the maturity of the Renewable Notes will be extended
to the Interest Payment Date occurring twelve months after such Election Date,
unless the holder thereof elects to terminate the automatic extension of the
maturity of the Renewable Notes or of any portion thereof having a principal
amount of $1,000 or any multiple of $1,000 in excess thereof by delivering a
notice of such effect to the Paying Agent not less than nor more than a number
of days to be specified in the applicable Pricing Supplement prior to such
Election Date. Such option may be exercised with respect to less than the
entire principal amount of the Renewable Notes; provided that the principal
amount for which such option is not exercised is at least $1,000 or any larger
amount that is an integral multiple of $1,000. Notwithstanding the foregoing,
the maturity of the Renewable Notes may not be extended beyond the Final
Maturity Date, as specified in the applicable Pricing Supplement (the "Final
Maturity Date"). If the holder elects to terminate the automatic extension of
the maturity of any portion of the
 
                                      S-13

 
principal amount of the Renewable Notes and such election is not revoked as
described below, such portion will become due and payable on the Interest
Payment Date falling six months (unless another period is specified in the
applicable Pricing Supplement) after the Election Date prior to which the
holder made such election.
 
  An election to terminate the automatic extension of maturity may be revoked
as to any portion of the Renewable Notes having a principal amount of $1,000 or
any multiple of $1,000 in excess thereof by delivering a notice to such effect
to the Paying Agent on any day following the effective date of the election to
terminate the automatic extension of maturity and prior to the date 15 days
before the date on which such portion would otherwise mature. Such a revocation
may be made for less than the entire principal amount of the Renewable Notes
for which the automatic extension of maturity has been terminated; provided
that the principal amount of the Renewable Notes for which the automatic
extension of maturity has been terminated and for which such a revocation has
not been made is at least $1,000 or any larger amount that is an integral
multiple of $1,000. Notwithstanding the foregoing, a revocation may not be made
during the period from and including a Record Date to but excluding the
immediately succeeding Interest Payment Date.
 
  An election to terminate the automatic extension of the maturity of the
Renewable Notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent holder.
 
  The Renewable Notes may be redeemed in whole or in part at the option of the
Company on the Interest Payment Dates in each year specified in the applicable
Pricing Supplement, commencing with the Interest Payment Date specified in the
applicable Pricing Supplement, at a redemption price as stated in the
applicable Pricing Supplement, together with accrued and unpaid interest to the
date of redemption. Notwithstanding anything to the contrary in this Prospectus
Supplement, notice of redemption will be provided by mailing a notice of such
redemption to each holder by first class mail, postage prepaid, at least 180
days prior to the date fixed for redemption.
 
EXTENSION OF MATURITY
 
  The Pricing Supplement relating to each Note (other than an Amortizing Note)
will indicate whether the Company has the option to extend the maturity of such
Note for one or more periods of one or more whole years (each an "Extension
Period") up to but not beyond the date (the "Final Maturity Date") set forth in
such Pricing Supplement. If the Company has such option with respect to any
such Note (an "Extendible Note"), the following procedures will apply, unless
modified as set forth in the applicable Pricing Supplement.
 
  The Company may exercise such option with respect to an Extendible Note by
notifying the Paying Agent of such exercise at least 45 but not more than 60
days prior to the maturity date originally in effect with respect to such Note
(the "Original Maturity Date") or, if the maturity date of such Note has
already been extended, prior to the maturity date then in effect (an "Extended
Maturity Date"). No later than 38 days prior to the Original Maturity Date or
an Extended Maturity Date, as the case may be (each, a "Maturity Date"), the
Paying Agent will mail to the holder of such Note a notice (the "Extension
Notice") relating to such Extension Period, by first class mail, postage
prepaid, setting forth (a) the election of the Company to extend the maturity
of such Note; (b) the new Extended Maturity Date; (c) the interest rate
applicable to the Extension Period (which, in the case of a Floating Rate Note,
will be calculated with reference to a Base Rate and the Spread and/or Spread
Multiplier, if any); and (d) the provisions, if any, for redemption during the
Extension Period, including the date or dates on which, the period or periods
during which and the price or prices at which such redemption may occur during
the Extension Period. Upon the mailing by the Paying Agent of an Extension
Notice to the holder of an Extendible Note, the maturity of such Note shall be
extended automatically, and, except as modified by the Extension Notice and as
described in the next paragraph, such Note will have the same terms it had
prior to the mailing of such Extension Notice.
 
                                      S-14

 
  Notwithstanding the foregoing, not later than 10:00 A.M., New York City time,
on the twentieth calendar day prior to the Maturity Date then in effect for an
Extendible Note (or, if such day is not a Business Day, not later than 10:00
A.M., New York City time, on the immediately succeeding Business Day), the
Company may, at its option, revoke the interest rate provided for in the
Extension Notice and establish a higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period by causing the Paying Agent to send notice of such higher
interest rate (or, in the case of a Floating Rate Note, a higher Spread and/or
Spread Multiplier, if any) to the holder of such Note by first class mail,
postage prepaid, or by such other means as shall be agreed between the Company
and the Paying Agent. Such notice shall be irrevocable. All Extendible Notes
with respect to which the Maturity Date is extended in accordance with an
Extension Notice will bear such higher interest rate (or, in the case of a
Floating Rate Note, a higher Spread and/or Spread Multiplier, if any) for the
Extension Period, whether or not tendered for repayment.
 
  If the Company elects to extend the maturity of an Extendible Note, the
holder of such Note will have the option to require the Company to repay such
Note on the Maturity Date then in effect at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date. In order for
an Extendible Note to be repaid on such Maturity Date, the holder thereof must
follow the procedures set forth below under "--Repayment at the Noteholders'
Option; Repurchase" for optional repayment, except that the period for delivery
of such Note or notification to the Paying Agent shall be at least 25 but not
more than 35 days prior to the Maturity Date then in effect and except that a
holder who has tendered an Extendible Note for repayment pursuant to an
Extension Notice may, by written notice to the Paying Agent, revoke any such
tender for repayment until 3:00 P.M., New York City time, on the twentieth
calendar day prior to the Maturity Date then in effect (or, if such day is not
a Business Day, until 3:00 P.M., New York City time, on the immediately
succeeding Business Day).
 
INDEXED NOTES
 
  The Notes may be issued, from time to time, as Notes of which the principal
amount payable on a date more than nine months from the date of original issue
(the "Stated Maturity") and/or on which the amount of interest payable on an
Interest Payment Date will be determined by reference to currencies, currency
units, commodity prices, financial or non-financial indices or other factors
(the "Indexed Notes"), as indicated in the applicable Pricing Supplement.
Holders of Indexed Notes may receive a principal amount at maturity that is
greater than or less than the face amount of such Notes depending upon the
fluctuation of the relative value, rate or price of the specified index.
Specific information pertaining to the method for determining the principal
amount payable at maturity, a historical comparison of the relative value, rate
or price of the specified index and the face amount of the Indexed Note and
certain additional United States federal tax considerations will be described
in the applicable Pricing Supplement.
 
BOOK-ENTRY SYSTEM
 
  Upon issuance, all Fixed Rate Book-Entry Notes having the same Issue Date,
interest rate, if any, amortization schedule, if any, maturity date and other
terms, if any, will be represented by one or more Global Securities, and all
Floating Rate Book-Entry Notes having the same Issue Date, Initial Interest
Rate, Base Rate, Interest Reset Period, Interest Payment Dates, Index Maturity,
Spread and/or Spread Multiplier, if any, Minimum Interest Rate, if any, Maximum
Interest Rate, if any, maturity date and other terms, if any, will be
represented by one or more Global Securities. Each Global Security representing
Book-Entry Notes will be deposited with, or on behalf of, The Depository Trust
Company, New York, New York (the "Depository"), and registered in the name of a
nominee of the Depository. Book-Entry Notes will not be exchangeable for
Certificated Notes, except under the circumstances described in the Prospectus
under "Description of Debt Securities--Payment of Interest and Exchange--Global
Debt Securities and Book-Entry System." Certificated Notes will not be
exchangeable for Book-Entry Notes and will not otherwise be issuable as Book-
Entry Notes.
 
                                      S-15

 
  A further description of the Depository's procedures with respect to Global
Securities representing Book-Entry Notes is set forth in the Prospectus under
"Description of Debt Securities--Payment of Interest and Exchange--Global Debt
Securities and Book-Entry System." The Depository has confirmed to the Company,
each Agent and the Trustee that it intends to follow such procedures.
 
PAYMENTS ON AMORTIZING NOTES
 
  Amortizing Notes are securities for which payments of principal and interest
are made in installments over the life of the security. Interest on each
Amortizing Note will be computed on the basis of a 360-day year of twelve 30-
day months. Payments with respect to Amortizing Notes will be applied first to
interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. A table setting forth repayment information in
respect of each Amortizing Note will be provided to the original purchaser and
will be available, upon request, to subsequent Holders.
 
OPTIONAL REDEMPTIONS
 
  The Pricing Supplement will indicate that the Notes cannot be redeemed prior
to maturity or will indicate the terms on which the Notes will be redeemable at
the option of the Company. Notice of redemption will be provided by mailing a
notice of such redemption to each holder by first class mail, postage prepaid,
at least 30 days and not more than 60 days prior to the date fixed for
redemption to the respective address of each holder as that address appears
upon the books maintained by the Paying Agent. Unless otherwise provided in the
applicable Pricing Supplement, the Notes, except for Amortizing Notes, will not
be subject to any sinking fund.
 
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASE
 
  If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be repayable at the option of the holder on a date or dates
specified prior to its maturity date and, unless otherwise specified in such
Pricing Supplement, at a price equal to 100% of the principal amount thereof,
together with accrued interest to the date of repayment, unless such Note was
issued with original issue discount, in which case the Pricing Supplement will
specify the amount payable upon such repayment.
 
  In order for such a Note to be repaid, the Paying Agent must receive at least
30 days but not more than 60 days prior to the repayment date (i) the Note with
the form entitled "Option to Elect Repayment" on the reverse of the Note duly
completed or (ii) a telegram, telex, facsimile transmission or a letter from a
member of a national securities exchange, or the National Association of
Securities Dealers, Inc. (the "NASD") or a commercial bank or trust company in
the United States setting forth the name of the holder of the Note, the
principal amount of the Note, the principal amount of the Note to be repaid,
the certificate number or a description of the tenor and terms of the Note, a
statement that the option to elect repayment is being exercised thereby and a
guarantee that the Note to be repaid, together with the duly completed form
entitled "Option to Elect Repayment" on the reverse of the Note, will be
received by the Paying Agent not later than the fifth Business Day after the
date of such telegram, telex, facsimile transmission or letter, provided,
however, that such telegram, telex, facsimile transmission or letter shall only
be effective if such Note and such form duly completed are received by the
Paying Agent by such fifth Business Day. Except in the case of Renewable Notes
or Extendible Notes, and unless otherwise specified in the applicable Pricing
Supplement, exercise of the repayment option by the holder of a Note will be
irrevocable. The repayment option may be exercised by the holder of a Note for
less than the entire principal amount of the Note but, in that event, the
principal amount of the Note remaining outstanding after repayment must be an
Authorized Denomination.
 
  If a Note is represented by a Global Security, the Depository's nominee will
be the holder of such Note and therefore will be the only entity that can
exercise a right to repayment. In order to ensure that the Depository's nominee
will timely exercise a right to repayment with respect to a particular Note,
the beneficial owner of such Note must instruct the broker or other direct or
indirect participant through which it holds an
 
                                      S-16

 
interest in such Note to notify the Depository of its desire to exercise a
right to repayment. Different firms have different deadlines for accepting
instructions from their customers and, accordingly, each beneficial owner
should consult the broker or other direct or indirect participant through which
it holds an interest in a Note in order to ascertain the deadline by which such
an instruction must be given in order for timely notice to be delivered to the
Depository.
 
  The Company may purchase Notes at any price in the open market or otherwise.
Notes so purchased by the Company may, at the discretion of the Company, be
held or resold or surrendered to the relevant Trustee for cancellation.
 
                             FOREIGN CURRENCY RISKS
 
EXCHANGE RATES AND EXCHANGE CONTROLS
 
  Any investment in Notes that are denominated in, or the payment of which is
related to the value of, a Specified Currency other than U.S. dollars entails
significant risks that are not associated with a similar investment in a
security denominated in U.S. dollars. Such risks include, without limitation,
the possibility of significant changes in rates of exchange between the U.S.
dollar and the various foreign currencies (or composite currencies) and the
possibility of the imposition or modification of exchange controls by either
the U.S. or a foreign government. Such risks generally depend on economic and
political events over which the Company has no control. In recent years, rates
of exchange between U.S. dollars and certain foreign currencies have been
highly volatile and such volatility may be expected to continue in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations in such rate that may
occur during the term of any Note. Depreciation against the U.S. dollar of the
currency in which a Note is payable would result in a decrease in the effective
yield of such Note below its coupon rate and, in certain circumstances, could
result in a loss to the investor on a U.S. dollar basis. In addition, depending
on the specific terms of a currency linked Note, changes in exchange rates
relating to any of the currencies involved may result in a decrease in its
effective yield and, in certain circumstances, could result in a loss of all or
a substantial portion of the principal of a Note to the investor.
 
  THIS PROSPECTUS SUPPLEMENT, THE ACCOMPANYING PROSPECTUS AND ANY PRICING
SUPPLEMENT DO NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT IN NOTES DENOMINATED
IN, OR THE PAYMENT OF WHICH IS RELATED TO THE VALUE OF, A FOREIGN CURRENCY OR A
COMPOSITE CURRENCY AND THE COMPANY DISCLAIMS ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE PURCHASERS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS SUCH RISKS MAY CHANGE FROM TIME TO TIME.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS
TO THE RISKS ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED IN, OR THE PAYMENT
OF WHICH IS RELATED TO THE VALUE OF, SPECIFIED CURRENCIES OTHER THAN U.S.
DOLLARS. SUCH NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE
UNSOPHISTICATED WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS.
 
  The information set forth in this Prospectus Supplement is directed to
prospective purchasers who are United States residents, and the Company
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, premium,
if any, and interest on the Notes. Such persons should consult their own
counsel with regard to such matters.
 
  Governments have imposed from time to time, and may in the future impose,
exchange controls which could affect exchange rates as well as the availability
of a specified foreign currency at the time of payment of principal of,
premium, if any, or interest on a Note. Even if there are no actual exchange
controls, it is possible that the Specified Currency for any particular Note
not denominated in U.S. dollars would not be available
 
                                      S-17

 
when payments on such Note are due. In that event, the Company would make
required payments in U.S. dollars on the basis of the Market Exchange Rate on
the date of such payment, or if such rate of exchange is not then available, on
the basis of the Market Exchange Rate as of the most recent practicable date.
See "Description of Notes--Payment Currency."
 
  With respect to any Note denominated in, or the payment of which is related
to the value of, a foreign currency or currency unit, the applicable Pricing
Supplement will include information with respect to applicable current exchange
controls, if any, and historic exchange rate information on such currency or
currency unit. The information contained therein shall constitute a part of
this Prospectus Supplement and is furnished as a matter of information only and
should not be regarded as indicative of the range of or trends in fluctuations
in currency exchange rates that may occur in the future.
 
GOVERNING LAW AND JUDGMENTS
 
  The Notes will be governed by and construed in accordance with the laws of
the State of California. In the event an action based on Notes denominated in a
Specified Currency other than U.S. dollars were commenced in a court of the
United States, it is likely that such court would grant judgment relating to
the Notes only in U.S. dollars.
 
                UNITED STATES INCOME TAX CONSEQUENCES TO HOLDERS
 
  In the opinion of Irell & Manella, Los Angeles, California, counsel to the
Company, the following summary accurately describes the principal United States
federal income tax consequences of ownership and disposition of the Notes to
initial holders purchasing Notes at the "issue price" (as defined below). This
summary is based on the Internal Revenue Code of 1986, as amended to the date
hereof (the "Code"), administrative pronouncements, judicial decisions and
existing and proposed Treasury Regulations, including regulations concerning
the treatment of debt instruments issued with original issue discount (the "OID
Regulations"), changes to any of which subsequent to the date of this
Prospectus Supplement may affect the tax consequences described herein. The OID
Regulations are effective for Notes issued on or after April 4, 1994. This
summary discusses only Notes held as capital assets, within the meaning of
Section 1221 of the Code. It does not discuss all of the tax consequences that
may be relevant to a holder in light of his particular circumstances or to
holders subject to special rules, such as certain financial institutions,
insurance companies, dealers in securities or foreign currencies, persons
holding Notes as a hedge against, or which are hedged against, currency risks,
or Holders whose functional currency (as defined in Code Section 985) is not
the United States dollar. Finally, this summary does not discuss Discount Notes
(as defined below) which qualify as "applicable high-yield discount
obligations" under Section 163(i) of the Code. Holders of Discount Notes which
are "applicable high-yield discount obligations" may be subject to special
rules. Persons considering the purchase of Notes should consult their tax
advisors with regard to the application of the United States federal income tax
laws to their particular situations as well as any tax consequences arising
under the laws of any state, local or foreign taxing jurisdiction.
 
  As used herein, the term "Holder" means an owner of a Note that is (i) for
United States federal income tax purposes a citizen or resident of the United
States, (ii) a corporation, partnership, or other entity created or organized
in or under the laws of the United States or of any political subdivision
thereof, or (iii) an estate or trust the income of which is subject to United
States federal income taxation regardless of its source.
 
 Payments of Interest
 
  Interest paid on a Note will generally be taxable to a Holder as ordinary
interest income at the time it accrues or is received in accordance with the
Holder's method of accounting for federal income tax purposes. Under the OID
Regulations, for accrual basis and other electing taxpayers, all payments of
interest on a Note that matures one year or less from its date of issuance will
be included in the stated redemption price at
 
                                      S-18

 
maturity of the Notes and will be taxed in the manner described below under "--
Discount Notes." Special rules governing the treatment of interest paid with
respect to Discount Notes, including certain Floating Rate Notes, Foreign
Currency Notes, Currency Indexed Notes, Notes providing for payments of
principal or interest linked to commodity prices, equity indices or other
factors, are discussed below.
 
 Discount Notes
 
  A Note which is issued for an amount less than its stated redemption price at
maturity will generally be considered to have been issued at an original issue
discount for federal income tax purposes (a "Discount Note"). The "issue price"
of a Note will equal the first price to the public (not including bond houses,
brokers or similar persons or organizations acting in the capacity of
underwriters, placement agents or wholesalers) at which a substantial amount of
the Notes is sold. The restated redemption price at maturity of a Note will
equal the sum of all payments required under the Note other than payments of
"qualified stated interest." "Qualified stated interest" is stated interest
unconditionally payable as a series of payments in cash or property (other than
debt instruments of the issuer) at least annually during the entire term of the
Note and equal to the outstanding principal balance of the Note multiplied by a
single fixed rate or certain variable rates of interest, or certain
combinations thereof. Special tax considerations (including possible original
issue discount) may arise with respect to Floating Rate Notes providing for (i)
one Base Rate followed by one or more Base Rates, (ii) a single fixed rate
followed by a floating rate or (iii) a Spread Multiplier. Purchasers of
Floating Rate Notes with any of such features should carefully examine the
applicable Pricing Supplement and should consult their tax advisors with
respect to such a feature since the tax consequences will depend, in part, on
the particular terms of the purchased Note. Special rules may also apply if a
Floating Rate Note is subject to a cap, floor, governor or similar restriction
that is not fixed throughout the term of the Note and is reasonably expected as
of the issue date to cause the yield on the Note to be significantly less or
more than the expected yield determined without the restriction.
 
  If the difference between a Note's stated redemption price at maturity and
its issue price is less than a de minimis amount, i.e., 1/4 of 1 percent of the
stated redemption price at maturity multiplied by the number of complete years
to maturity, then the Note will not be considered to have original issue
discount. Holders of Notes with a de minimis amount of original issue discount
will generally include such original issue discount in income, as capital gain,
on a pro rata basis as principal payments are made on the Note.
 
  A Holder of Discount Notes will be required to include any qualified stated
interest payments in income in accordance with the Holder's method of
accounting for federal income tax purposes. Holders of Discount Notes that
mature more than one year from their date of issuance will be required to
include original issue discount in income for federal income tax purposes as it
accrues, in accordance with a constant yield method based on a compounding of
interest, which may precede the receipt of cash payments attributable to such
income. Under this method, Holders of Discount Notes generally will be required
to include in income increasingly greater amounts of original issue discount in
successive accrual periods.
 
  Under proposed regulations, contingent payments on Floating Rate Notes that
do not provide for qualified stated interest payments will be included in
income as they become fixed (if they are due within six months after they
become fixed), to the extent that such interest payments exceed minimum stated
interest, if any. If such payments are not due within six months after the date
their amount becomes fixed, a portion of such payments will be included in
income as interest over the period between the date on which the payments are
fixed and the date on which payments are due, and the remainder will be
included when the payments are fixed.
 
  Under the OID Regulations, a Note that matures one year or less from its date
of issuance will be treated as a "short-term Discount Note." In general, a cash
method Holder of a short-term Discount Note is not required to accrue original
issue discount for United States federal income tax purposes unless it elects
to do so. Holders who make such an election, Holders who report income for
federal income tax purposes on the accrual method and certain other Holders,
including banks and dealers in securities, are required to include
 
                                      S-19

 
original issue discount in income on such short-term Discount Notes as it
accrues on a straight-line basis, unless an election is made to accrue the
original issue discount according to a constant yield method based on daily
compounding. In the case of a Holder who is not required and who does not elect
to include original issue discount in income currently, any gain realized on
the sale, exchange or retirement of the short-term Discount Notes will be
ordinary income to the extent of the original issue discount accrued on a
straight-line basis (or, if elected, according to a constant yield method based
on daily compounding) through the date of sale, exchange or retirement. In
addition, such Holders will be required to defer deductions for any interest
paid on indebtedness incurred to purchase or carry short-term Discount Notes in
an amount not exceeding the deferred interest income, until such deferred
interest income is recognized.
 
  Discount Notes permitting redemption prior to maturity may be subject to
rules that differ from the general rules discussed above. Purchasers of such
Discount Notes should carefully examine the applicable Pricing Supplement and
should consult their tax advisors with respect to such a feature since the tax
consequences with respect to original issue discount will depend, in part, on
the particular terms and the particular features of the purchased Note.
 
  The OID Regulations contain aggregation rules stating that in certain
circumstances if more than one type of Note is issued as part of the same
issuance of securities to a single holder, some or all of such Notes may be
treated together as a single debt instrument with a single issue price,
maturity date, yield to maturity and stated redemption price at maturity for
purposes of calculating and accruing any original issue discount. Unless
otherwise provided in the related Pricing Statement, the Company does not
expect to treat any of the Notes as being subject to the aggregation rules for
purposes of computing original issue discount.
 
 Sale, Exchange or Retirement of the Notes
 
  Upon the sale, exchange or retirement of a Note, a Holder will recognize
taxable gain or loss equal to the difference between the amount realized on the
sale, exchange or retirement and such Holder's adjusted tax basis in the Note.
For these purposes, the amount realized does not include any amount
attributable to accrued interest on the Note. Amounts attributable to accrued
interest are treated as interest as described under "--Payments of Interest"
above, in accordance with the Holder's method of accounting for federal income
tax purposes as described therein. A Holder's adjusted tax basis in a Note will
equal the cost of the Note to such Holder, increased by the amount of any
original issue discount previously included in income by the Holder with
respect to such Note and reduced by any amortized premium and any principal
payments received by the Holder and, in the case of an Discount Note, by the
amounts of any other payments that do not constitute qualified stated interest
(as defined above).
 
  Subject to the discussion under "--Foreign Currency Notes" below, gain or
loss realized on the sale, exchange or retirement of a Note will be capital
gain or loss (except in the case of a short-term Discount Note, to the extent
of any original issue discount not previously included in the Holder's taxable
income), and will be long-term capital gain or loss if at the time of sale,
exchange or retirement the Note has been held for more than one year. See "--
Discount Notes" above. The excess of net long-term capital gains over net
short-term capital losses is taxed at a lower rate than ordinary income for
certain non-corporate taxpayers. The distinction between capital gain or loss
and ordinary income or loss is also relevant for purposes of, among other
things, limitations on the deductibility of capital losses.
 
 Amortizable Bond Premium
 
  If a Holder purchases a Note for an amount that is greater than the amount
payable at maturity, such Holder will be considered to have purchased such Note
with "amortizable bond premium" equal in amount to such excess, and may elect
(in accordance with applicable Code provisions) to amortize such premium, using
a constant yield method, over the term of the Note (where such Note is not
optionally redeemable prior to its maturity date). If such Note may be
optionally redeemed prior to maturity, the amount of amortizable bond premium
is determined with reference to the amount payable on maturity or, if it
results in
 
                                      S-20

 
a smaller premium attributable to the period of earlier redemption date, with
reference to the amount payable on the earlier redemption date. A Holder who
elects to amortize bond premium must reduce his tax basis in the Note by the
amount of the premium amortized in any year. An election to amortize bond
premium applies to all taxable debt obligations then owned and thereafter
acquired by the taxpayer and may be revoked only with the consent of the
Internal Revenue Service with respect to debt instruments acquired after
revocation.
 
 Foreign Currency Notes
 
  The following summary relates to Notes that are denominated in a currency or
currency unit other than the U.S. dollar ("Foreign Currency Notes").
 
  A Holder who uses the cash method of accounting for tax purposes and who
receives a payment of qualified stated interest (including any portion of sales
proceeds received with respect to accrued interest) in a foreign currency with
respect to a Foreign Currency Note will be required to include in income the
U.S. dollar value of the foreign currency payment (determined on the date such
payment is received) regardless of whether the payment is in fact converted to
U.S. dollars at that time, and such U.S. dollar value will be the Holder's tax
basis in the foreign currency. For IRS reporting purposes the Company generally
will determine such U.S. dollar value as of the date such payment is made. A
cash method Holder who receives such a payment in U.S. dollars pursuant to an
option available under such Note will be required to include the amount of such
payment in income upon receipt.
 
  In the case of accrual method taxpayers and Holders of Discount Notes, a
Holder will be required to include in income the U.S. dollar value of the
amount of interest income (including original issue discount, but reduced by
amortizable bond premium to the extent applicable) that has accrued and is
otherwise required to be taken into account with respect to a Foreign Currency
Note during an accrual period. The U.S. dollar value of such accrued income
will be determined by translating such income at the average rate of exchange
for the accrual period or, with respect to an accrual period that spans two
taxable years, at the average rate for the partial period within the taxable
year. Such Holder will recognize ordinary income or loss, if any, with respect
to the foreign currency payment of such accrued interest (including any portion
of sales proceeds received with respect to accrued interest) on the date such
income is actually received. The amount of ordinary income or loss recognized
will equal the difference between the U.S. dollar value of the foreign currency
payment received (determined on the date such payment is received) in respect
of such accrual period (or, where a Holder receives U.S. dollars, the amount of
such payment in respect of such accrual period) and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above). A Holder may elect to translate interest income (including original
issue discount) into U.S. dollars at the spot rate on the last day of the
interest accrual period (or, in the case of a partial accrual period, the spot
rate on the last date of the taxable year) or, if the date of receipt is within
five business days of the last day of the interest accrual period, the spot
rate on the date of receipt. A Holder that makes such an election must apply it
consistently to all debt instruments from year to year and cannot change the
election without the consent of the Internal Revenue Service.
 
  Original issue discount and amortizable bond premium on a Foreign Currency
Note are to be determined in the relevant foreign currency.
 
  Any loss realized on the sale, redemption, exchange, retirement or other
taxable disposition of a Foreign Currency Note with amortizable bond premium by
a Holder who has not elected to amortize such premium under Section 171 of the
Code will be a capital loss to the extent of such bond premium. If such an
election is made, amortizable bond premium taken into account on a current
basis shall reduce interest income in units of the relevant foreign currency
and any amount not taken into account upon a redemption prior to maturity may
be deducted as an ordinary loss. Exchange gain or loss is realized on such
amortized bond premium with respect to any period by treating the bond premium
amortized in such period as a return of principal.
 
 
                                      S-21

 
  A Holder's tax basis in a Foreign Currency Note, and the amount of any
subsequent adjustment to such Holder's tax basis, will be the U.S. dollar
value of the foreign currency amount paid for such Foreign Currency Note, or
of the foreign currency amount of the adjustment, determined on the date of
such purchase or adjustment. A Holder who purchases a Foreign Currency Note
with previously owned foreign currency will recognize ordinary income or loss
in an amount equal to the difference, if any, between such Holder's tax basis
in the foreign currency and the U.S. dollar fair market value of the Foreign
Currency Note on date of purchase.
 
  Gain or loss realized upon the sale, redemption, exchange, retirement or
other taxable disposition of a Foreign Currency Note that is attributable to
fluctuations in currency exchange rates will be ordinary income or loss which
will not be treated as interest income or expense, except to the extent
provided in Internal Revenue Service administrative pronouncements. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between (i) the U.S. dollar value of the foreign currency principal amount of
such Note, and any payment with respect to accrued interest, determined on the
date such payment is received or such Note is disposed of, and (ii) the U.S.
dollar amount value of the foreign currency principal amount of such Note,
determined on the date such Holder acquired such Note, and the U.S. dollar
value of the accrued interest received, determined by translating such
interest at the average exchange rate for the accrual period. Such foreign
currency gain or loss will be recognized only to the extent of the total gain
or loss realized by a Holder on the sale, exchange or retirement of the
Foreign Currency Note. The source of such foreign currency gain or loss will
be determined by reference to the residence of the Holder or the "qualified
business unit" of the Holder on whose books the Note is properly reflected.
Any gain or loss realized by such a Holder in excess of such foreign currency
gain or loss will generally be capital gain or loss except in the case of a
short-term Discount Note, to the extent of any original issue discount not
previously included in the Holder's income.
 
  A Holder will have a tax basis in any foreign currency received on the sale,
redemption, exchange, retirement or other taxable disposition of a Foreign
Currency Note equal to the U.S. dollar value of such foreign currency,
determined at the time of such sale, redemption, exchange, retirement or other
taxable disposition. Proposed regulations issued under Section 988 of the Code
provide a special rule for purchases and sales of publicly traded Foreign
Currency Notes by a cash method taxpayer under which units of foreign currency
paid or received are translated into U.S. dollars at the spot rate on the
settlement date of the purchase or sale. Accordingly, no exchange gain or loss
will result from currency fluctuations between the trade date and the
settlement of such a purchase or sale. An accrual method taxpayer may elect
the same treatment required of cash method taxpayers with respect to the
purchases and sale of publicly traded Foreign Currency Notes provided the
election is applied consistently. Such election cannot be changed without the
consent of the Internal Revenue Service. Any gain or loss realized by a Holder
on a sale or other disposition of foreign currency (including its exchange for
U.S. dollars or its use to purchase Foreign Currency Notes) will be ordinary
income or loss.
 
 Currency Indexed Notes
 
  Notes that are Currency Indexed Notes should constitute debt obligations of
the Company for United States federal income tax purposes and no portion of
the issue price of the Notes should be separately allocated to the foreign
exchange feature of the Notes. However, the proper treatment of payments of
principal of and interest on such Currency Indexed Notes is uncertain at this
time.
 
  Holders of Currency Indexed Notes should consult with their tax advisors as
to the federal income tax consequences of the ownership and disposition of
such Notes.
 
 Extension of Maturity
 
  The extension of the maturity of a Note pursuant to its original terms may
be viewed as a taxable exchange if the extension of the final maturity date is
considered a significant modification as defined under the Proposed
Regulations Section 1.1001-3.
 
                                     S-22

 
 Notes Linked to Commodity Prices, Equity Indices or Other Factors
 
  The United States federal income tax consequences to a holder of the
ownership and disposition of Indexed Notes and Notes that are exchangeable into
the stock or a debt instrument of another issuer may vary depending on the
exact terms of the Notes. Under certain circumstances it is possible that
proposed regulations relating to contingent debt instruments would require
bifurcation of such a Note into component parts. If bifurcation were required,
the U.S. federal income tax treatment of the Note would differ materially from
that described herein. Holders intending to purchase such Notes should refer to
the discussion relating to taxation in the applicable Pricing Supplement.
 
 Backup Withholding
 
  Certain noncorporate Holders may be subject to backup withholding at a rate
of 31% on payments of principal, premium and interest (including the accrual of
original issue discount, if any) on, and the proceeds of disposition of, a
Note. Backup withholding will apply only if (i) the Holder fails to furnish its
Taxpayer Identification Number ("TIN") which, for an individual, would be his
Social Security number, (ii) the Company is notified by the Internal Revenue
Service ("IRS") that the Holder furnished an incorrect TIN, (iii) the Company
is notified by IRS that the Holder has failed to properly report payments of
interest and dividends or (iv) the Holder fails to certify, under penalty of
perjury, that it has furnished a correct TIN and has not been notified by the
Internal Revenue Service that it is subject to backup withholding for failure
to report interest and dividend payments. Holders should consult their tax
advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining such an exemption if applicable.
 
  The amount of any backup withholding from a payment to a Holder will be
allowed as a credit against such Holder's United States federal income tax
liability and may entitle such Holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
 
                              PLAN OF DISTRIBUTION
 
  The Notes are being offered on a continuing basis by the Company through the
Agents, who have agreed to use reasonable efforts to solicit offers to purchase
Notes. The Company will have the sole right to accept offers to purchase Notes
and may reject any offer to purchase Notes in whole or in part. An Agent will
have the right to reject any offer to purchase Notes solicited by it in whole
or in part. Payment of the purchase price of the Notes will be required to be
made in immediately available funds. The Company will pay an Agent, in
connection with sales of Notes resulting from a solicitation made or an offer
to purchase received by such Agent, a commission ranging from .125% to .750% of
the principal amount of Notes to be sold; provided, however, that commissions
with respect to Notes maturing in thirty years or greater will be negotiated.
 
  The Company may also sell Notes to an Agent as principal for its own account
at discounts to be agreed upon at the time of sale. Such Notes may be resold to
investors and other purchasers at prevailing market prices, or prices related
thereto at the time of such resale, as determined by the Agent, or, if so
agreed, at a fixed public offering price. In addition, the Agents may offer the
Notes they have purchased as principal to other dealers. The Agents may sell
Notes to any dealer at a discount and, unless otherwise specified in the
applicable Pricing Supplement, such discount allowed to any dealer will not be
in excess of the discount to be received by such Agent from the Company. After
the initial public offering of Notes to be resold to investors and other
purchasers, the public offering price (in the case of Notes to be resold at a
fixed public offering price), concession and discount may be changed.
 
  The Company has reserved the right to sell the Notes directly to investors,
and may solicit and accept offers to purchase Notes directly from investors
from time to time on its own behalf. The Company may accept offers to purchase
Notes through additional agents and may appoint additional agents for the
purpose of soliciting offers to purchase Notes, in either case on terms
substantially identical to the terms contained in the Distribution Agreement.
Such other agents, if any, will be named in the applicable Pricing Supplement.
 
                                      S-23

 
  An Agent may be deemed to be an "underwriter" within the meaning of the
Securities Act of 1933 (the "Securities Act"). The Company and the Agents have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act, or to contribute to payments made in
respect thereof. The Company has also agreed to reimburse the Agents for
certain expenses.
 
  The Company does not intend to apply for listing of the Notes on a national
securities exchange. The Company has been advised by the Agents that the Agents
intend to make a market in the Notes, as permitted by applicable laws and
regulations. The Agents are not obligated to do so, however, and the Agents may
discontinue making a market at any time without notice. No assurance can be
given as to the liquidity of any trading market for the Notes.
 
  Concurrently with the offering of Notes through the Agents as described
herein, the Company may issue other Debt Securities pursuant to the Indenture
referred to herein.
 
  The Agents and/or certain of their affiliates may engage in transactions with
and perform services for the Company and certain of its affiliates in the
ordinary course of business.
 
                               VALIDITY OF NOTES
 
  The validity of the Notes will be passed upon for the Company by Irell &
Manella, Los Angeles, California, counsel for the Company, or such other
attorney of the Company as the Company may designate, and for the Agents by
Latham & Watkins, Los Angeles, California. Ronald M. Loeb, a partner of the law
firm of Irell & Manella, is a Director of the Company and is a record owner of
53,631 shares of the Company's common stock.
 
 
                                      S-24

 
PROSPECTUS
 
                                  $250,000,000
                            
                            [LOGO OF MATTEL, INC.]

                                 MATTEL, INC.
 
                                DEBT SECURITIES
 
                               ----------------
 
  The Company may offer from time to time in one or more series its debt
securities (the "Debt Securities") in amounts, at prices and on terms to be
determined at the time of offering. The aggregate initial offering price of the
Debt Securities to be offered will be limited to $250,000,000 (or the
equivalent if Debt Securities are denominated in foreign currency or currency
units) or, if Debt Securities are issued at an original issue discount, such
greater amount as shall result in aggregate proceeds of $250,000,000 to the
Company.
 
  The accompanying Prospectus Supplement sets forth the specific designation,
aggregate principal amount, designated currency (or currency unit), purchase
price, maturity, interest rate (or manner of calculation thereof), time of
payment of interest (if any), and any other specific terms of the Debt
Securities. The Prospectus Supplement also sets forth the name of and
compensation to each underwriter, dealer or agent (if any) involved in the
offer of the Debt Securities, the other terms and manner of the offer and
distribution of the Debt Securities and the net proceeds to the Company from
such offering.
 
                               ----------------
 
 THESE SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES AND
   EXCHANGE  COMMISSION  OR ANY  STATE  SECURITIES  COMMISSION NOR  HAS  THE
     SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
       PASSED UPON  THE  ACCURACY OR  ADEQUACY  OF THIS  PROSPECTUS. ANY
        REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
                               ----------------
 
  Debt Securities may be offered to or through underwriters, dealers or agents
designated from time to time, as set forth in the Prospectus Supplement, and
may be offered to other purchasers directly by the Company. See "Plan of
Distribution" for possible indemnification arrangements for underwriters,
dealers and agents.
 
                               ----------------
 
September 1, 1994

 
  NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND ANY ACCOMPANYING PROSPECTUS
SUPPLEMENT IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN AND THEREIN, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER, DEALER OR
AGENT. NEITHER THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT SHALL CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY DEBT SECURITIES IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN OFFERING
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS
SUPPLEMENT NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT
THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN OR IN ANY
PROSPECTUS SUPPLEMENT IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF
OR OF SUCH PROSPECTUS SUPPLEMENT.
 
                             AVAILABLE INFORMATION
 
  Mattel, Inc. ("Mattel" or the "Company") has filed with the Securities and
Exchange Commission (the "Commission") in Washington, D.C. a Registration
Statement on Form S-3 (including all amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Debt Securities offered hereby. This Prospectus and
any Prospectus Supplement do not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Debt Securities, reference is hereby made to the
Registration Statement and the exhibits and schedules thereto.
 
  Mattel is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by
Mattel can be inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549, and at the Commission's regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048, and in
Chicago at 500 West Madison Street, Room 1400, Chicago, Illinois 60661. Copies
of such materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Reports, proxy statements and other information concerning Mattel can also be
inspected and copied at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005 and the Pacific Stock Exchange, 115 Sansome
Street, 2nd Floor, San Francisco, California 94104, on which exchanges certain
securities of Mattel are listed.
 
                INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
 
  The following documents, which Mattel has filed with the Commission pursuant
to the Exchange Act, are hereby incorporated by reference in, and shall be
deemed to be a part of, this Prospectus: Mattel's Annual Report on Form 10-K
for the year ended December 31, 1993, its Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1994 and June 30, 1994, its Current Reports on
Form 8-K dated February 1, 1994, February 8, 1994, February 9, 1994, March 23,
1994, March 28, 1994, April 14, 1994, April 20, 1994, July 21, 1994, July 22,
1994 and July 29, 1994, its Current Report on Form 8-K dated May 31, 1994 and
the First Amendment thereto on Form 8-K/A dated June 30, 1994 and its Notice of
Annual Meeting of Stockholders and Proxy Statement, dated March 28, 1994.
 
  All documents filed by Mattel pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering made hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part thereof from the respective
dates of filing of such documents. Any statement contained in this Prospectus
or in any Prospectus Supplement or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed
 
                                       2

 
to be modified or superseded for purposes of this Prospectus and any Prospectus
Supplement to the extent that a statement contained herein or in any Prospectus
Supplement (or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference in this Prospectus)
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed to constitute a part of this Prospectus or any
Prospectus Supplement except as so modified or superseded.
 
  Mattel will provide without charge to any person to whom this Prospectus is
delivered, on the written or oral request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated
by reference therein). Requests should be directed to the attention of the
Corporate Secretary, Mattel, Inc., 333 Continental Boulevard, El Segundo,
California 90245-5012, or by telephone at (310) 252-3616.
 
  IN CONNECTION WITH THE OFFERING OF CERTAIN DEBT SECURITIES, THE UNDERWRITERS
MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICES OF SUCH SECURITIES OR OTHER SECURITIES OF THE COMPANY AT LEVELS ABOVE
THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
                                  THE COMPANY
 
  Mattel is a leading worldwide designer, manufacturer and marketer of toys.
The Company's three strongest principal product lines are BARBIE fashion dolls
and doll clothing and accessories, FISHER-PRICE toys and juvenile products and
the Company's Disney-licensed toys, each of which has broad worldwide appeal.
Additional current principal product lines consist of die-cast vehicles and
accessories, including HOT WHEELS; POWER WHEELS battery-powered ride-on
vehicles; large dolls; preschool toys, including SEE 'N SAY toys; and the UNO
and SKIP-BO games.
 
  Mattel management has implemented three complementary business strategies
designed to achieve consistent, profitable growth: first, a concentration on
leveraging the consumer franchises of Mattel's time-tested core product lines;
second, expansion of the Company's international marketing and distribution
network; and third, organization of the Company's manufacturing capabilities to
maximize overall efficiency and flexibility and minimize risk. Mattel
management has also pursued a financial strategy of reducing risk through the
implementation of strict financial controls. These include the control of
expenses and the aggressive management of working capital, foreign exchange
risk and the financial risk associated with new product introductions. In
addition, management's objective is to minimize the cost of capital to the
Company by blending the sources of funds through the control of long-term
leverage, and the maintenance of sufficient operating cash and short-term
credit lines to finance the Company's seasonal working capital requirements.
 
  Mattel was incorporated in California in 1948 and reincorporated in Delaware
in 1968. Its executive offices are located at 333 Continental Boulevard, El
Segundo, California 90245-5012, telephone (310) 252-2000.
 
                                USE OF PROCEEDS
 
  Except as otherwise set forth in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Debt Securities
for general corporate purposes, which may include additions to working capital,
reduction of other indebtedness, financing of capital expenditures, potential
acquisitions and the repurchase by the Company of its common shares. Funds not
required immediately for such purposes may be invested temporarily in short-
term marketable securities.
 
 
                                       3

 
                      RATIOS OF EARNINGS TO FIXED CHARGES
 
  The following table sets forth the Company's unaudited ratios of earnings to
fixed charges for the periods indicated.
 


                                     SIX MONTHS ENDED       YEARS ENDED(a)(b)
                                     ----------------- ------------------------
                                     JUNE 30, JUNE 30,
                                       1994   1993(A)  1993 1992 1991 1990 1989
                                     -------- -------- ---- ---- ---- ---- ----
                                                      
Ratio of earnings to fixed
 charges(c)(d)......................   5.78     3.67   4.20 4.51 4.00 3.33 2.83

- --------
(a) The consolidated ratios of earnings to fixed charges for 1993, 1992 and
    1991 have been restated for the effects of the November 1993 merger of
    Fisher-Price, Inc. into a wholly-owned subsidiary of the Company, accounted
    for as a pooling of interests. Fisher-Price, Inc. was excluded from periods
    prior to July 1, 1991, while its business was operated as a division of The
    Quaker Oats Company.
(b) The Company's financial reporting year ended on December 31 for years 1991
    through 1993 and on the last Saturday of December for years 1989 and 1990.
(c) The ratio of earnings to fixed charges is computed by dividing income
    before taxes, extraordinary items, cumulative effect of changes in
    accounting principles, fixed charges, minority interest and undistributed
    income of less-than-majority-owned affiliates by fixed charges. Fixed
    charges are the sum of interest costs (whether expensed or capitalized) and
    the portion of aggregate rental expense (one-third) which is estimated to
    represent the interest factor in such rentals.
(d) Until July 1, 1991, the Company was a guarantor of certain foreign bank
    lines of credit extended to less-than-majority-owned joint ventures.
    Performance by the Company pursuant to these guarantees was deemed
    unlikely; thus the associated fixed charges have been excluded from
    computation of the ratio of earnings to fixed charges. The portion of fixed
    charges paid by less-than-majority-owned joint ventures for which the
    Company was guarantor was approximately $4.5 million, $4.8 million and $5.5
    million in 1991, 1990 and 1989, respectively.
 
                         DESCRIPTION OF DEBT SECURITIES
 
  The Debt Securities offered hereby are to be issued under an indenture, dated
as of August 1, 1994 (the "Indenture"), between Mattel and Chemical Trust
Company of California, as Trustee (the "Trustee"). The following summary of
certain provisions of the Indenture, a copy of which was filed as an exhibit to
the Registration Statement, does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all provisions of the
Indenture, including the definition therein of certain terms. Wherever
particular sections or defined terms of the Indenture are referred to, it is
intended that such sections or defined terms shall be incorporated herein by
reference.
 
GENERAL
 
  The Debt Securities will rank equally with all other unsecured and
unsubordinated indebtedness of Mattel.
 
  The Debt Securities that may be offered under the Indenture are not limited
in amount. The Debt Securities may be issued in one or more series with the
same or various maturities, at par, at a premium, or with an original issue
discount. The Prospectus Supplement will set forth the initial offering price,
the aggregate principal amount and the following terms of the Debt Securities
in respect of which this Prospectus is delivered: (1) the title of such Debt
Securities; (2) any limit on the aggregate principal amount of such Debt
Securities; (3) the date or dates on which principal on such Debt Securities
will be payable; (4) the rate
 
                                       4

 
or rates and, if applicable, the method used to determine the rate including
any commodity, commodity index, stock exchange index or financial index, at
which such Debt Securities will bear interest, if any, the date or dates from
which such interest will accrue, the dates on which such interest shall be
payable and the record date for the interest payable on any interest payment
date; (5) the place or places where principal of, premium, if any, and interest
on such Debt Securities will be payable; (6) the period or periods within
which, the price or prices at which and the terms and conditions upon which the
Debt Securities may be redeemed; (7) the obligation, if any, of the Company to
redeem or purchase the Debt Securities pursuant to any sinking fund or
analogous provisions or at the option of a holder thereof; (8) the
denominations of such Debt Securities, if other than denominations of $1,000
and any integral multiple thereof; (9) the portion of principal amount of such
Debt Securities that shall be payable upon acceleration, if other than the
principal amount thereof; (10) the currency of denomination of such Debt
Securities; (11) the designation of the currency or currencies in which payment
of principal of and interest on such Debt Securities will be made; (12) if
payments of principal of, premium, if any, or interest on the Debt Securities
are to be made in currency other than the denominated currency, the manner in
which the exchange rate with respect to such payments will be determined; (13)
the manner in which the amounts of payment of principal of, premium, if any, or
interest on such Debt Securities will be determined, if such amounts may be
determined by reference to an index based on a currency or currencies other
than that in which the Debt Securities are denominated or designated to be
payable or by reference to a commodity, commodity index, stock exchange index
or financial index; (14) any other terms of such Debt Securities, which other
terms will not be inconsistent with the provisions of the Indenture; and (15)
any depositaries, interest rate calculation agents, exchange rate calculation
agents or other agents with respect to the Debt Securities other than those
originally appointed. (Indenture (S) 2.2) The Prospectus Supplement will set
forth any federal income tax, accounting or special considerations applicable
to the Debt Securities.
 
PAYMENT OF INTEREST AND EXCHANGE
 
  Each Debt Security will be represented by either a global security (a "Global
Debt Security") registered in the name of The Depository Trust Company, as
Depository (the "Depository") or a nominee of the Depository (each such Debt
Security represented by a Global Debt Security being herein referred to as a
"Book-Entry Debt Security") or a certificate issued in definitive registered
form (a "Certificated Debt Security"), as set forth in the applicable
Prospectus Supplement. Except as set forth under "Global Debt Securities and
Book-Entry System" below, Book-Entry Debt Securities will not be issuable in
certificated form.
 
  Certificated Debt Securities. Certificated Debt Securities may be transferred
or exchanged at the Trustee's office or paying agencies in accordance with the
terms of the Indenture. No service charge will be made for any transfer or
exchange of Certificated Debt Securities, but Mattel may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith. Certificated Debt Securities will not be exchangeable for
Book-Entry Debt Securities, except under the circumstances described below
under "Global Debt Securities and Book-Entry System." (Indenture (S)(S) 2.4 and
2.7)
 
  The transfer of Certificated Debt Securities and the right to the principal
of, premium, if any, and interest on such Certificated Debt Securities may be
effected only by surrender of the old certificate representing such
Certificated Debt Securities and either reissuance by Mattel or the Trustee of
the old certificate to the new Holder or the issuance by Mattel or the Trustee
of a new certificate to the new Holder.
 
  Global Debt Securities and Book-Entry System. Each Global Debt Security
representing Book-Entry Debt Securities will be deposited with, or on behalf
of, the Depository, and registered in the name of the Depository or a nominee
of the Depository. Except as set forth below, Book-Entry Debt Securities will
not be exchangeable for Certificated Debt Securities and will not otherwise be
issuable as Certificated Debt Securities.
 
 
                                       5

 
  The procedures that the Depository has indicated it intends to follow with
respect to Book-Entry Debt Securities are set forth below.
 
  Ownership of beneficial interests in Book-Entry Debt Securities will be
limited to persons that have accounts with the Depository for the related
Global Debt Security ("participants") or persons that may hold interests
through participants. Upon the issuance of a Global Debt Security, the
Depository will credit, on its book-entry registration and transfer system, the
participants' accounts with the respective principal amounts of the Book-Entry
Debt Securities represented by such Global Debt Security beneficially owned by
such participants. The accounts to be credited shall be designated by any
dealers, underwriters or agents participating in the distribution of such Book-
Entry Debt Securities. Ownership of Book-Entry Debt Securities will be shown
on, and the transfer of such ownership interests will be effected only through,
records maintained by the Depository for the related Global Debt Security (with
respect to interests of participants) and on the records of participants (with
respect to interests of persons holding 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 Book-Entry Debt
Securities.
 
  So long as the Depository for a Global Debt Security, or its nominee, is the
registered owner of such Global Debt Security, such Depository or such nominee,
as the case may be, will be considered the sole owner or holder of the Book-
Entry Debt Securities represented by such Global Debt Security for all purposes
under the Indenture. Except as set forth below, owners of Book-Entry Debt
Securities will not be entitled to have such securities registered in their
names, will not receive or be entitled to receive physical delivery of a
certificate in definitive form representing such securities and will not be
considered the owners or holders thereof under the Indenture. Accordingly, each
person owning Book-Entry Debt Securities must rely on the procedures of the
Depository for the related Global Debt Security 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 Indenture.
 
  The Company understands, however, that under existing industry practice, the
Depository will authorize the persons on whose behalf it holds a Global Debt
Security to exercise certain rights of holders of Debt Securities, and the
Indenture provides that the Company, the Trustee and their respective agents
will treat as the holder of a Debt Security the persons specified in a written
statement of the Depository with respect to such Global Debt Security for
purposes of obtaining any consents or directions required to be given by
holders of the Debt Securities pursuant to the Indenture. (Indenture
(S) 2.14.6)
 
  Payments of principal, premium, if any, and interest on Book-Entry Debt
Securities will be made to the Depository or its nominee, as the case may be,
as the registered holder of the related Global Debt Security. (Indenture
(S) 2.14.5) None of Mattel, the Trustee or any other agent of Mattel 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 in such Global Debt Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
 
  Mattel expects that the Depository, upon receipt of any payment of principal,
premium, if any, or interest on a Global Debt Security, will immediately credit
participants' accounts with payments in amounts proportionate to the respective
amounts of Book-Entry Debt Securities held by each such participant as shown on
the records of such Depository. Mattel also expects that payments by
participants to owners of beneficial interests in Book-Entry Debt Securities
held through such participants will be governed by standing customer
instructions and customary practices, as is now the case with the securities
held for the accounts of customers in bearer form or registered in "street
name," and will be the responsibility of such participants.
 
  If the Depository is at any time unwilling or unable to continue as
Depository or ceases to be a clearing agency registered under the Exchange Act,
and a successor Depository registered as a clearing agency under the Exchange
Act is not appointed by Mattel within 90 days, Mattel will issue Certificated
Debt Securities in
 
                                       6

 
exchange for such Global Debt Security. In addition, Mattel may at any time and
in its sole discretion determine not to have any of the Book-Entry Debt
Securities represented by one or more Global Debt Securities and, in such
event, will issue Certificated Debt Securities in exchange for such Global Debt
Security or Securities. Any Certificated Debt Securities issued in exchange for
a Global Debt Security will be registered in such name or names as the
Depository shall instruct the Trustee. It is expected that such instructions
will be based upon directions received by the Depository from participants with
respect to ownership of Book-Entry Debt Securities relating to such Global Debt
Security.
 
  The foregoing information in this section concerning the Depository and the
Depository's Book-Entry System has been obtained from sources the Company
believes to be reliable, but the Company takes no responsibility for the
accuracy thereof.
 
NO PROTECTION IN THE EVENT OF A CHANGE OF CONTROL
 
  Unless otherwise set forth in the Prospectus Supplement, the Debt Securities
will not contain any provisions which may afford holders of the Debt Securities
protection in the event of a change in control of the Company or in the event
of a highly leveraged transaction (whether or not such transaction results in a
change in control of the Company).
 
CERTAIN COVENANTS OF MATTEL
 
  Limitation on Liens. The Company shall not and shall not permit any
Subsidiary to create, incur, assume or suffer to exist any Lien (as defined)
upon any of the their respective assets, except for: (i) Liens existing on the
date of the Indenture or arising under the Indenture; (ii) any extension,
renewal or replacement (or successive extensions, renewals or replacements) of
any Lien existing on the date of the Indenture; (iii) Liens on Current Assets
(as defined) (or on any promissory notes received in satisfaction of any of the
accounts receivable of the Company or any of its Subsidiaries) securing
Indebtedness (as defined) incurred to finance working capital requirements,
provided, however, that the Indebtedness secured by such Lien does not mature
later than 36 months from the date incurred; (iv) certain Liens incurred in the
ordinary course of business; (v) Liens on property that are in existence at the
time the Company or its Subsidiaries acquire such property, provided that such
Liens (A) are not incurred in connection with, or in contemplation of, the
acquisition of the property acquired and (B) do not extend to or cover any
property or assets of the Company or any Subsidiary other than the property so
acquired; (vi) purchase money Liens upon or in any real or personal property
(including fixtures and other equipment) acquired or held by the Company or any
Subsidiary in the ordinary course of business to secure the purchase price of
such property or to secure Indebtedness incurred solely for the purpose of
financing or refinancing the acquisition or improvement of or construction
costs related to such property, provided that no such Lien shall extend to or
cover any property other than the property being acquired or improved; (vii)
any interest or title of a lessor in the property subject to any Capitalized
Lease or Sale/Leaseback Transaction that is permitted under the restrictions
described below under "--Limitation on Sale/Leaseback Transactions;" or (viii)
other Liens securing Indebtedness in an aggregate principal amount which,
together with the aggregate outstanding principal amount of all other
Indebtedness of the Company and its Subsidiaries secured by Liens permitted
under the terms of this subsection (viii) and the aggregate amount of the
Sale/Leaseback Transactions which would otherwise be permitted under the
restrictions described below in clause (i) under the caption"--Limitation on
Sale/Leaseback Transactions," does not at the time any such Lien is incurred
exceed ten percent of the Consolidated Net Tangible Assets (as defined) as
shown in the latest audited consolidated balance sheet of the Company and its
Subsidiaries.
 
  Limitation on Sale/Leaseback Transactions. The Company shall not, and shall
not permit any Subsidiary, to enter into any Sale/Leaseback Transaction, unless
either (i) the Company or such Subsidiary would be entitled, pursuant to
subsection (viii) under "--Limitation on Liens," to incur Indebtedness in a
principal amount equal to or exceeding the amount of such Sale/Leaseback
Transaction, secured by a Lien on the property to be leased; or (ii) the
Company or such Subsidiary, within 90 days after the effective date
 
                                       7

 
of such transaction, applies or unconditionally agrees to apply to the
retirement of Indebtedness an amount equal to the greater of the net proceeds
of the Sale/Leaseback Transaction or the fair value, in the opinion of the
Board of Directors, of such property at the time of such transaction (in either
case adjusted to reflect the remaining term of the lease).
 
  Merger, Consolidation, or Sale of Assets. The Company may not consolidate or
merge with or into, or sell, lease, convey or otherwise dispose of all or
substantially all of its assets to, another corporation, person or entity
unless (i) the Company is the surviving person or the successor or transferee
is a corporation organized under the laws of the United States, any state
thereof or the District of Columbia, (ii) the successor assumes all the
obligations of the Company under the Debt Securities and the Indenture, and
(iii) immediately after such transaction no Event of Default (as defined)
exists.
 
CERTAIN DEFINITIONS
 
  Set forth below are certain significant terms which are defined in Section
1.1 of the Indenture:
 
  "Consolidated Net Tangible Assets" means the total amount of assets of the
Company and its Subsidiaries on a consolidated basis (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups occurring after January 1, 1988 of capital assets
(excluding in any case write-ups in connection with accounting for acquisitions
in conformity with generally accepted accounting principles), after deducting
therefrom (i) all current liabilities of the Company and its Subsidiaries, (ii)
all investments in unconsolidated Subsidiaries of the Company and in persons
which are not Subsidiaries of the Company (except, in each case, investments in
marketable securities) and (iii) all goodwill, trade names, trademarks,
patents, unamortized debt discount and expense and other intangible items, all
as set forth on the most recently available consolidated balance sheet of the
Company and its Subsidiaries, prepared in conformity with generally accepted
accounting principles.
 
  "Current Assets" means any asset of the Company or any of its Subsidiaries
that would be classified as a current asset on an audited consolidated balance
sheet of the Company prepared, in accordance with generally accepted accounting
principles, on the date any Lien on such asset is incurred.
 
  "Discount Security" means any Debt Security that provides for an amount less
than the stated principal amount thereof to be due and payable upon declaration
of acceleration of the maturity thereof pursuant to the terms of the Indenture.
 
  "Indebtedness" means, with respect to any person, and without duplication:
 
    (1) any liability of such person (A) for borrowed money, or (B) for any
  letter of credit for the account of such person supporting obligations of
  such person or other persons, or (C) evidenced by a bond, note, debenture
  or similar instrument (including a purchase money obligation) given in
  connection with the acquisition of any businesses, properties or assets of
  any kind (other than a trade payable or a current liability arising in the
  ordinary course of business), or (D) for the payment of money relating to a
  Capitalized Lease;
 
    (2) any liability of others described in the preceding clause (1) that
  the person has guaranteed or that is otherwise its legal liability; and
 
    (3) any amendment, supplement, modification, deferral, renewal, extension
  or refunding of any liability of the types referred to in clauses (1) and
  (2) above.
 
  "Lien" means any lien, security interest, charge, mortgage, pledge or other
encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
 
                                       8

 
  "Sale/Leaseback Transaction" means any arrangement with any person (other
than the Company or any of its Subsidiaries) providing for the leasing by the
Company or any of its Subsidiaries of any property which has been or is to be
sold or transferred by the Company or such Subsidiary to such person or to any
person (other than the Company or any of its Subsidiaries) to which funds have
been or are to be advanced by such person on the security of the leased
property.
 
  "Subsidiary" of any specified person means (i) a corporation a majority of
whose capital stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by such person or by
such person and a subsidiary or subsidiaries of such person or by a subsidiary
or subsidiaries of such person or (ii) any other person (other than a
corporation) in which such person or such person and a subsidiary or
subsidiaries of such person or a subsidiary or subsidiaries of such person
directly or indirectly, at the date of determination thereof has at least
majority ownership interest.
 
EVENTS OF DEFAULT
 
  The following will be Events of Default under the Indenture with respect to
Debt Securities of any series: (a) default in the payment of any interest upon
any Debt Security of that series when it becomes due and payable, and
continuance of such default for a period of 30 days; (b) default in the payment
of principal of or premium, if any, on any Debt Security of that series when
due; (c) default in the deposit of any sinking fund payment, when and as due in
respect of any Debt Security of that series; (d) default in the performance or
breach of any other covenant or warranty of Mattel in the Indenture (other than
a covenant or warranty that has been included in the Indenture solely for the
benefit of a series of Debt Securities other than that series), which default
continues uncured for a period of 60 days after written notice to the Company
by the Trustee or to the Company and the Trustee by the holders of at least 25%
in principal amount of the outstanding Debt Securities of that series as
provided in the Indenture; (e) unless the terms of such series otherwise
provide, an event of default under any Indebtedness for money borrowed by the
Company (including a default with respect to Debt Securities of any series
other than that series) or any Subsidiary, whether such Indebtedness now exists
or shall hereafter be created, if (A) such default either (1) results from the
failure to pay any such Indebtedness at its stated final maturity or (2)
relates to an obligation other than the obligation to pay such Indebtedness at
its stated final maturity and results in the holder or holders of such
Indebtedness causing such Indebtedness to become due prior to its stated
maturity and (B) the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to pay
principal at stated final maturity or the maturity of which has been so
accelerated, aggregates $10 million or more at any one time outstanding; (f)
certain events of bankruptcy, insolvency or reorganization; and (g) any other
Event of Default provided with respect to Debt Securities of that series that
is described in the Prospectus Supplement accompanying this Prospectus. No
Event of Default with respect to a particular series of Debt Securities (except
as to the certain events in bankruptcy, insolvency or reorganization)
necessarily constitutes an Event of Default with respect to any other series of
Debt Securities. (Indenture (S) 6.1) The occurrence of an Event of Default
would constitute an event of default under certain of Mattel's existing bank
lines. In addition, the occurrence of certain Events of Default or an
acceleration under the Indenture would constitute an event of default under
certain other indebtedness of Mattel.
 
  If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, then in every such case the Trustee
or the holders of not less than 25% in principal amount of the outstanding Debt
Securities of that series may, by a notice in writing to Mattel (and to the
Trustee if given by the holders), declare to be due and payable immediately the
principal (or, if the Debt Securities of that series are Discount Securities,
such portion of the principal amount as may be specified in the terms of that
series) and premium, if any, of all Debt Securities of that series. In the case
of an Event of Default resulting from the certain events of bankruptcy,
insolvency or reorganization, the principal (or such specified amount) and
premium, if any, of all outstanding Debt Securities shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any holder of outstanding Debt Securities. At any time after
a declaration of acceleration with respect to Debt Securities of any series
 
                                       9

 
has been made, but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the holders of a majority in principal amount of
the outstanding Debt Securities of that series may, subject to the Company
having paid or deposited with the Trustee a sum sufficient to pay overdue
interest and principal which has become due other than by acceleration and
certain other conditions, rescind and annul such acceleration if all Events of
Default, other than the non-payment of accelerated principal and premium, if
any, with respect to Debt Securities of that series, have been cured or waived
as provided in the Indenture. (Indenture (S) 6.2) For information as to waiver
of defaults see the discussion set forth below under "--Modification and
Waiver." Reference is made to the Prospectus Supplement relating to any series
of Debt Securities that are Discount Securities for the particular provisions
relating to acceleration of a portion of the principal amount of such Discount
Securities upon the occurrence of an Event of Default and the continuation
thereof.
 
  The Indenture provides that the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of outstanding Debt Securities, unless the Trustee receives indemnity
satisfactory to it against any loss, liability or expense. (Indenture (S) 7.1
(e)) Subject to certain rights of the Trustee, the holders of a majority in
principal amount of the outstanding Debt Securities of any series shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on the Trustee with respect to the Debt Securities of that series. (Indenture
(S) 6.12)
 
  No holder of any Debt Security of any series will have any right to institute
any proceeding, judicial or otherwise, with respect to the Indenture or for the
appointment of a receiver or trustee, or for any remedy under the Indenture,
unless such holder shall have previously given to the Trustee written notice of
a continuing Event of Default with respect to Debt Securities of that series
and unless also the holders of at least 25% in principal amount of the
outstanding Debt Securities of that series shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the holders of a majority
in principal amount of the outstanding Debt Securities of that series a
direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. (Indenture (S) 6.7) Notwithstanding the
foregoing, the holder of any Debt Security will have an absolute and
unconditional right to receive payment of the principal of, premium, if any,
and any interest on such Debt Security on or after the due dates expressed in
such Debt Security and to institute suit for the enforcement of any such
payment. (Indenture (S) 6.8)
 
  The Indenture requires Mattel, within 90 days after the end of each of its
fiscal years, to furnish to the Trustee a statement as to compliance with the
Indenture. (Indenture (S) 4.3) The Indenture provides that the Trustee may
withhold notice to the holders of Debt Securities of any series of any Default
or Event of Default (except in payment on any Debt Securities of such series)
with respect to Debt Securities of such series if it in good faith determines
that withholding such notice is in the interest of the holders of Debt
Securities. (Indenture (S) 7.5)
 
MODIFICATION AND WAIVER
 
  Modifications to, and amendments of, the Indenture may be made by Mattel and
the Trustee with the consent of the holders of 66 2/3% in principal amount of
the outstanding Debt Securities of each series affected by such modifications
or amendments provided, however, that no such modification or amendment may,
without the consent of the holder of each outstanding Debt Security affected
thereby: (a) change the amount of Debt Securities whose holders must consent to
an amendment or waiver; (b) reduce the rate of or extend the time for payment
of interest (including default interest) on any Debt Security; (c) reduce the
principal or premium, if any, or change the fixed maturity of any Debt Security
or reduce the amount of, or postpone the date fixed for, the payment of any
sinking fund or analogous obligation with respect to any series of Debt
Securities; (d) waive a default in the payment of the principal of, premium, if
any, or interest on any Debt Security (except a rescission of acceleration of
the Debt Securities of any series by the holders of at least a majority in
aggregate principal amount of the then outstanding Debt Securities of such
series and a waiver of
 
                                       10

 
the payment default that resulted from such acceleration); (e) make the Debt
Security payable in currency other than that stated in the Debt Security; (f)
make any change to certain provisions of the Indenture relating to, among other
things, the right of holders of Debt Securities to receive payment of the
principal, premium, if any, and interest on such Debt Securities and to
institute suit for the enforcement of any such payment and to waivers or
amendments; or (g) waive a redemption payment with respect to any Debt Security
or change any of the provisions with respect to the redemption of any Debt
Securities. (Indenture (S) 9.3)
 
  The holders of at least 66 2/3% in principal amount of the outstanding Debt
Securities of any series may on behalf of the holders of all Debt Securities of
that series waive, insofar as that series is concerned, compliance by Mattel
with provisions of the Indenture other than certain specified provisions.
(Indenture (S) 9.2) The holders of a majority in principal amount of the
outstanding Debt Securities of any series may on behalf of the holders of all
the Debt Securities of such series waive any past default under the Indenture
with respect to such series and its consequences, except a default in the
payment of the principal of, premium, if any, or any interest on any Debt
Security of that series or in respect of a provision which under the Indenture
cannot be modified or amended without the consent of the holder of each
outstanding Debt Security of that series affected. (Indenture (S) 6.13)
 
DEFEASANCE OF DEBT SECURITIES OR CERTAIN COVENANTS IN CERTAIN CIRCUMSTANCES
 
  Defeasance and Discharge. The Indenture provides that Mattel may be
discharged from any and all obligations in respect of the Debt Securities of
any series (except for certain obligations to register the transfer or exchange
of Debt Securities of such series, to replace stolen, lost or mutilated Debt
Securities of such series, to maintain paying agencies and the treatment of
funds held by paying agents) upon the deposit with the Trustee, in trust, of
money and/or government obligations in the same currency as such series that,
through the payment of interest and principal in respect thereof in accordance
with their terms, will provide money in an amount sufficient in the opinion of
a nationally recognized firm of independent public accountants to pay and
discharge each installment of principal (and premium, if any) and interest on
and any mandatory sinking fund payments in respect of the Debt Securities of
such series on the stated maturity of such payments in accordance with the
terms of the Indenture and such Debt Securities. Such discharge may occur only
if, among other things, (a) Mattel has received from, or there has been
published by, the United States Internal Revenue Service a ruling, or, since
the date of execution of the Indenture, there has been a change in the
applicable United States federal income tax law, in either case to the effect
that holders of the Debt Securities of such series will not recognize income,
gain or loss for United States federal income tax purposes as a result of such
deposit, defeasance and discharge and will be subject to United States federal
income tax on the same amount and in the same manner and at the same times as
would have been the case if such deposit, defeasance and discharge had not
occurred; and (b) such discharge will not be applicable to any Debt Securities
of such series then listed on the New York Stock Exchange or any other
securities exchange if such discharge would cause said Debt Securities to be
de-listed as a result thereof. (Indenture (S) 8.3)
 
  Defeasance of Certain Covenants. The Indenture provides that unless otherwise
provided by the terms of the applicable series of Debt Securities, upon
compliance with certain conditions, (i) Mattel may omit to comply with the
restrictive covenants contained in Sections 4.2 (except as to corporate
existence), 4.3 through 4.8 and Section 5.1 of the Indenture, including the
restrictive covenants described above under the caption "Certain Covenants of
Mattel"; and (ii) cross accelerations constituting Events of Default under
Section 6.1(e) shall be inapplicable to such series. The conditions include:
the deposit with the Trustee of money and/or government obligations in the same
currency as such series that, through the payment of interest and principal in
respect thereof in accordance with their terms, will provide money in an amount
sufficient in the opinion of a nationally recognized firm of independent public
accountants to pay principal, premium, if any, and interest on and any
mandatory sinking fund payments in respect of the Debt Securities of such
series on the stated maturity of such payments in accordance with the terms of
the Indenture and such Debt Securities; and the delivery to the Trustee of an
opinion of counsel to the effect that the holders of the Debt Securities of
such series will not recognize income, gain or loss for United States federal
income tax purposes as a result of
 
                                       11

 
such deposit and related covenant defeasance and will be subject to United
States federal income tax in the same amount and in the same manner and at the
same times as would have been the case if such deposit and related covenant
defeasance had not occurred. (Indenture (S) 8.4)
 
  Defeasance and Events of Default. In the event Mattel exercises its option to
omit compliance with certain covenants of the Indenture with respect to any
series of Debt Securities and the Debt Securities of such series are declared
due and payable because of the occurrence of any Event of Default, the amount
of money and government obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Debt Securities of such series at the time
of their stated maturity but may not be sufficient to pay amounts due on the
Debt Securities of such series at the time of the acceleration resulting from
such Event of Default. However, Mattel shall remain liable for such payments.
 
CONCERNING THE TRUSTEE
 
  Mattel maintains banking relationships in the ordinary course of business
with one or more affiliates of the Trustee.
 
                              PLAN OF DISTRIBUTION
 
GENERAL
 
  Mattel may sell the Debt Securities being offered hereby: (i) directly to
purchasers; (ii) through agents; (iii) through dealers; (iv) through
underwriters; or (v) through a combination of any such methods of sale.
 
  The distribution of the Debt Securities may be effected from time to time in
one or more transactions either: (i) at a fixed price or prices, which may be
changed; (ii) at market prices prevailing at the time of sale; (iii) at prices
related to such prevailing market prices; or (iv) at negotiated prices.
 
  Offers to purchase Debt Securities may be solicited directly by Mattel.
Offers to purchase Debt Securities may also be solicited by agents designated
by Mattel from time to time. Any such agent, who may be deemed to be an
"underwriter" as that term is defined in the Securities Act, involved in the
offer or sale of the Debt Securities in respect of which this Prospectus is
delivered will be named, and any commissions payable by Mattel to such agent
will be set forth, in the Prospectus Supplement.
 
  If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, Mattel will sell such Debt Securities to
the dealer, as principal. The dealer, who may be deemed to be an "underwriter"
as that term is defined in the Securities Act, may then resell such Debt
Securities to the public at varying prices to be determined by such dealer at
the time of resale.
 
  If an underwriter is, or underwriters are, utilized in the sale, Mattel will
execute an underwriting agreement with such underwriters at the time of sale to
them and the names of the underwriters will be set forth in the Prospectus
Supplement, which will be used by the underwriters to make resales of the Debt
Securities in respect of which this Prospectus is delivered to the public. In
connection with the sale of Debt Securities, such underwriters may be deemed to
have received compensation from the Company in the form of underwriting
discounts or commissions and may also receive commissions from purchasers of
Debt Securities for whom they may act as agents. Underwriters may also sell
Debt Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents. Any underwriting compensation paid by the Company to underwriters in
connection with the offering of Debt Securities, and any discounts, concessions
or commissions allowed by underwriters to participating dealers, will be set
forth in the Prospectus Supplement.
 
  Underwriters, dealers, agents and other persons may be entitled, under
agreements that may be entered into with Mattel, to indemnification by Mattel
against certain civil liabilities, including liabilities under the
 
                                       12

 
Securities Act. Underwriters and agents may engage in transactions with, or
perform services for, the Company in the ordinary course of business.
 
DELAYED DELIVERY ARRANGEMENTS
 
  If so indicated in the Prospectus Supplement, Mattel will authorize
underwriters, dealers or other persons to solicit offers by certain
institutions to purchase Debt Securities pursuant to contracts providing for
payment and delivery on a future date or dates. Institutions with which such
contracts may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and others. The obligations of any purchaser under any such
contract will not be subject to any conditions except that (a) the purchase of
the Debt Securities shall not at the time of delivery be prohibited under the
laws of the jurisdiction to which such purchaser is subject and (b) if the Debt
Securities are also being sold to underwriters, Mattel shall have sold to such
underwriters the Debt Securities not sold for delayed delivery. The
underwriters, dealers and such other persons will not have any responsibility
in respect of the validity or performance of such contracts. The Prospectus
Supplement relating to such contracts will set forth the price to be paid for
Debt Securities pursuant to such contracts, the commissions payable for
solicitation of such contracts and the date or dates in the future for delivery
of Debt Securities pursuant to such contracts.
 
                                 LEGAL MATTERS
 
  The validity of the Debt Securities will be passed upon for the Company by
Irell & Manella, Los Angeles, California. Ronald M. Loeb, a partner of the law
firm of Irell & Manella, is a Director of the Company and is the record owner
of 53,631 shares of the Company's common stock. Certain legal matters will be
passed upon for any underwriters or agents by Latham & Watkins, Los Angeles,
California.
 
                                    EXPERTS
 
  The consolidated financial statements and financial statement schedules of
the Company, incorporated in this Prospectus by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1993 (the "Form 10-
K"), have been so incorporated in reliance on the report of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting and, with respect to the historical financial
statements of Fisher-Price, Inc. for the fiscal year ended January 3, 1993, in
reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of said firm as experts in auditing and accounting. The
consolidated statement of income, stockholders' equity and cash flows of
Fisher-Price, Inc. and its subsidiaries for the six months ended December 29,
1991, prior to the restatement thereof (and therefore not presented in the Form
10-K) for the merger of Fisher-Price, Inc. with and into a wholly-owned
subsidiary of Mattel, as described in Note 2 to the consolidated financial
statements included in the Form 10-K, incorporated in this Prospectus by
reference, has been audited by Arthur Andersen & Co., independent public
accountants, as indicated in their report with respect thereto, and is
incorporated herein in reliance upon the authority of said firm as experts in
giving said report. The consolidated financial statements of Kransco for the
year ended December 31, 1993, incorporated in this Prospectus by reference to
the First Amendment to Current Report on Form 8-K/A dated June 30, 1994, have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
 
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