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RULE NO. 424(b)(3)
REGISTRATION NO. 333-59997
PRICING SUPPLEMENT
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(To Prospectus Supplement and Prospectus dated July 30, 1998)
$35,550,000
MERRILL LYNCH & CO., INC.
MEDIUM-TERM NOTES, SERIES B
1.5% PRINCIPAL PROTECTED NOTES DUE DECEMBER 15, 2005
(LINKED TO THE PERFORMANCE OF THE DOW JONES EURO STOXX 50 SM INDEX)
--------------
AGGREGATE PRINCIPAL AMOUNT: $35,550,000.
INITIAL PUBLIC OFFERING PRICE: $1,000 per Note ("Par"), plus accrued
interest, if any, from December 3, 1998.
COUPON: 1.5% per annum.
INTEREST PAYMENT DATES: June 15 and December 15 of each year,
commencing June 15, 1999.
MATURITY DATE: December 15, 2005.
HOLDER'S OPTIONAL REDEMPTION: Upon giving notice as provided herein, you
may redeem the Notes for Parity (as defined
below), as determined on the applicable
Determination Date (as defined below), on
any Business Day prior to the fifth
scheduled Trading Day preceding the Maturity
Date; provided that you may not redeem any
Notes if (i) the Company has exercised the
Company's Optional Redemption or (ii) Par,
is greater than or equal to Parity.
COMPANY'S OPTIONAL REDEMPTION: Upon giving notice as provided herein, we
may redeem the Notes, in whole but not in
part, on any Business Day on or after
December 15, 2001, at the greater of (i) Par
plus accrued but unpaid interest or (ii)
Parity as determined on the applicable
Determination Date (as defined below).
OTHER PROVISIONS:
The 1.5% Principal Protected Notes due December 15, 2005 (Linked to the
performance of the Dow Jones EURO STOXX 50sm Index) (the "Notes") are Fixed Rate
Notes as described in the accompanying Prospectus Supplement dated July 30,
1998, with other provisions as described herein. "Dow Jones EURO STOXX 50" is a
service mark of Dow Jones & Company, Inc. ("Dow Jones").
At maturity (whether as a result of acceleration or otherwise),
provided that we have not exercised our optional redemption right and you have
not exercised your optional redemption right, we will, with respect to each
$1,000 principal amount of any outstanding Note, pay to you an amount in U.S.
dollars equal to the greater of (1) Par plus accrued but unpaid interest or (2)
Parity as determined on the applicable Determination Date. "Parity" means the
product of (A) the Issue Price multiplied by (B) a fraction, the numerator of
which is the Closing USD Index Value, as determined on the Determination Date,
and the denominator of which is the Benchmark USD Index Value (as such terms are
defined herein). For purposes of redemption at maturity, the Determination Date
will be the fifth scheduled Trading Day preceding the Maturity Date, subject to
certain Market Disruption Events (as defined herein). The Benchmark USD Index
Value is $4,661.
The Notes will be issued and sold in denominations of $1,000, and
integral multiples thereof.
The Notes have been approved for listing on the American Stock Exchange
under the symbol "MLE.A", subject to official notice of issuance. It is not
possible to predict whether the Notes will trade in the secondary market or if
such market will be liquid or illiquid.
BEFORE YOU DECIDE TO INVEST IN THE NOTES, CAREFULLY READ THIS PRICING
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND PROSPECTUS, INCLUDING
THE RISK FACTORS BEGINNING ON PAGE PS-6 OF THIS PRICING SUPPLEMENT.
--------------
We expect that the Notes will be ready for delivery in book-entry form
only through the facilities of DTC on or about December 3, 1998.
--------------
MERRILL LYNCH & CO.
--------------
The date of this Pricing Supplement is November 24, 1998.
<PAGE>
Capitalized terms not defined herein have the meanings given to such terms
in the accompanying Prospectus Supplement.
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Aggregate Principal Amount............. $35,550,000.
Issuer................................. Merrill Lynch & Co., Inc. (the "Company").
Maturity Date.......................... December 15, 2005.
Coupon................................. 1.5% per annum.
Interest Payment Dates................. June 15 and December 15, commencing June 15, 1999.
Specified Currency..................... U.S. dollars.
Issue Price............................ $1,000 per Note ("Par"), plus accrued interest, if any, from December 3, 1998.
Pricing Date........................... November 24, 1998.
Original Issue Date (Settlement Date).. December 3, 1998.
CUSIP.................................. 59018 SU 36
Book-Entry Note or Certificated Note... Book-Entry.
Denominations.......................... The Notes will be issued and sold in denominations of $1,000,
and integral multiples thereof.
Trustee................................ The Chase Manhattan Bank.
Index.................................. The Dow Jones EURO STOXX 50sm, which is a capitalization-
weighted index of 50 European blue chip stocks from those
countries participating in the European Monetary
Union stated in ECU initially, and after the
introduction of the euro pursuant to the Treaty
(as defined herein), in euro, and calculated on a
price-return basis. The value of the Index is
available under the Bloomberg L.P. symbol "SX5E
Index Go." For more information regarding
calculation of and adjustments to the Index, see
"The Index" and "Discontinuance of the Index;
Adjustments to the Index."
Underlying Securities.................. Certain equity securities of the 50 companies that
comprise the Index, and each individually an
"Underlying Security." See "The Index."
Closing Index Value.................... The Closing Index Value for any Trading Day shall be the
value of the Index at the close of the Frankfurt
Stock Exchange ("FSE") as determined by STOXX Ltd.
("STOXX").
Noon Buying Rate....................... The rate of U.S. dollars equivalent to one ECU (and after
the introduction of the euro pursuant to the
Treaty, one euro) for the applicable Trading Day
as announced by the Federal Reserve Bank of New
York for customs purposes as the rate in the City
of New York for cable transfers in foreign
currencies.
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PS-2
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Closing USD Index Value................ The product on any specified Trading Day (the same
day for the determination of both such amounts) of
the Closing Index Value multiplied by the Noon
Buying Rate.
Initial Index Value.................... 3,167 ECU.
Initial Exchange Rate.................. $1.1545 to 1 ECU.
Initial USD Index Value................ $3,656.
Conversion Premium..................... 27.5%.
Benchmark USD Index Value.............. $4,661. The Benchmark USD Index Value equals the
product of the Initial USD Index Value multiplied
by the sum of one plus the Conversion Premium.
Holder's Optional Redemption........... On any Business Day prior to the fifth
scheduled Trading Day preceding the Maturity Date,
a Holder of the Notes may redeem such Holder's
Notes for Parity; provided that a Holder may not
redeem any Notes at the Holder's option if (i) the
Company has exercised the Company's Optional
Redemption or (ii) Par is greater than or equal to
Parity. The Holder must provide a written
Official Notice (in the form of Annex A attached
hereto) to the Company of its intention to
exercise its redemption right. The Official
Notice must be received by the Company by 4:00
P.M. New York time on a Business Day to be
effective on such Business Day. If such notice is
received after 4:00 P.M. New York time on any
Business Day or on a day that is not a Business
Day, such notice shall be effective on the next
day that is a Business Day. For the purposes of
calculating Parity with respect to the Holder's
Optional Redemption, the Determination Date shall
be the second Trading Day immediately following
effective notice to the Company of such Holder's
Optional Redemption; provided, however, that if a
Market Disruption Event should occur on such
second Trading Day, then the Determination Date
shall be the next succeeding Trading Day on which
no Market Disruption Event shall have occurred;
and provided, further, that if (i) a Market
Disruption Event shall have occurred for two
consecutive Trading Days or (ii) on the applicable
Determination Date, Parity is less than or equal to
Par, the notice shall lapse and be of no effect
and the Holder shall provide a new Official Notice
to the Company if it intends to exercise its
redemption right at any time after such lapse.
On the third Business Day following the applicable
Determination Date, or on such other day as agreed
to between the Company and the Holder in writing
the Company shall pay an amount equal to Parity to
the Holder upon delivery to the Company of the
applicable Notes to be redeemed.
Company's Optional Redemption.......... On any Business Day on or after December 15,
2001 (the "Call Period"), the Company, in its sole
discretion, may elect to call the Notes in whole
but not in part at the greater of (i) Par plus
accrued but unpaid interest on the Notes or (ii)
Parity by giving notice or causing notice to be
given at least 15 (but no more than 30) Business
Days prior to the intended Call Date (as defined
below) (the "Call Notice Date") to the Holders of
the Notes and to the Trustee on any Business Day
during the Call Period. For the purposes of
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PS-3
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<TABLE>
<S> <C>
calculating Parity with respect to the Company's
Optional Redemption, the Determination Date shall
be the next succeeding Trading Day on which no
Market Disruption Event shall have occurred
following the Call Notice Date. The "Call Date"
means the date on which payment with respect to
the Notes is made by the Company to the Holders of
the Notes upon delivery of the Notes by the
Holders thereof.
Redemption at Maturity...... At maturity (whether as a result of acceleration
or otherwise), the Company will, with respect to
the principal amount of each Note, upon delivery
of such Note to the Trustee, deliver the cash
amount equal to the greater of (i) Par plus
accrued but unpaid interest or (ii) Parity (as
calculated on the Determination Date). For
purposes of calculating redemption at maturity,
the Determination Date shall be the fifth
scheduled Trading Day preceding the Maturity Date
or, if there is a Market Disruption Event on such
day, the Determination Date will be the
immediately succeeding Trading Day on which no
Market Disruption Event shall have occurred;
provided that the Determination Date will be no
later than the third Trading Day preceding the
Maturity Date, notwithstanding the occurrence of a
Market Disruption Event on such Trading Day.
Determination Date.......... The Determination Date shall be the date as set
forth in each respective provision related to
Redemption at Maturity, the Holder's Optional
Redemption and the Company's Optional Redemption.
Trading Day................. A day on which trading is generally conducted (i)
on the FSE or its successors and (ii) on at least
one exchange on which futures or options contracts
related to the Index are traded, other than a day
on which trading on any such exchange is scheduled
to close prior to its regular weekday closing
time, as determined by the Calculation Agent.
Business Day................ 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.
Calculation Agent........... Merrill Lynch, Pierce, Fenner & Smith Incorporated
("MLPF&S").
For potential conflicts of interest that may exist
between the Calculation Agent and the holders of
the Notes, see "Risk Factors" below. All
determinations made by the Calculation Agent shall
be at the sole discretion of the Calculation Agent
and, absent manifest error, shall be conclusive
for all purposes and binding on the Company and
beneficial owners of the Notes.
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PS-4
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<TABLE>
<S> <C>
All percentages resulting from any calculation on
the Notes will be rounded to the nearest one
hundred-thousandth of a percentage point, with
five one-millionths of a percentage point rounded
upwards (e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655)), and all dollar
amounts used in or resulting from such calculation
will be rounded to the nearest cent with one-half
cent being rounded upwards.
Market Disruption Event...... "Market Disruption Event" means either of the
following events as determined by the Calculation
Agent:
(a) the suspension or material limitation as
determined by the Calculation Agent for more than
two hours of trading, or during the one-half hour
period preceding the close of trading on the
applicable exchange, in 20% or more, by weight, of
the Underlying Securities comprising the Index; or
(b) the suspension or material limitation, in
each case, for more than two hours of trading
(whether by reason of movements in price otherwise
exceeding levels permitted by the relevant
exchange or otherwise) in (A) futures contracts
related to the Index or options on such futures
contracts, which are traded on any major exchange
or (B) option contracts related to the Index which
are traded on any major exchange.
For the purposes of this definition, a
limitation on the hours in a trading day and/or
number of days of trading will not constitute a
Market Disruption Event if it results from an
announced change in the regular business hours of
the relevant exchange.
Events of Default and
Acceleration................ In case of an acceleration of the maturity
of the Notes, the amount payable to a beneficial
owner of a Note will be equal to the greater of
(i) Par plus accrued but unpaid interest or (ii)
Parity, calculated as though the date of early
repayment were the stated maturity date of the
Notes. If a bankruptcy proceeding is commenced in
respect of the Company, the claim of the
beneficial owner of a Note may be limited, under
Section 502(b)(2) of Title 11 of the United States
Code, to the principal amount of the Note plus an
additional amount of contingent interest
calculated as though the date of the commencement
of the proceeding were the maturity date of the
Notes. Upon the occurrence of an Event of Default
with respect to the Notes, beneficial owners of
the Notes may accelerate the maturity of the
Notes, as described under "Description of Debt
Securities Events of Default" in the accompanying
Prospectus.
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PS-5
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RISK FACTORS
Your investment in the Notes will involve certain risks. You should
carefully consider the following discussion of risks before deciding whether an
investment in the Notes is suitable for you. While the Index consists of the
equity securities issued by certain European companies, the Index is not
intended to provide an indication of the pattern of price movements of equity
securities of European companies generally.
THE AMOUNT PAYABLE AT MATURITY
You should be aware that if the Closing USD Index Value does not exceed the
Benchmark USD Index Value on the Determination Date, you will receive Par at
maturity. This will be true even if the value of the USD Index Value was higher
than the Benchmark USD Index Value at some time during the life of the Notes but
later falls below the Benchmark USD Index Value.
YOUR YIELD MAY BE LOWER THAN THE YIELD ON A STANDARD DEBT SECURITY OF COMPARABLE
MATURITY
The amount we pay you at maturity may, in addition to payments of
fixed interest, be less than the return you could earn on other investments.
Your yield may be less than the yield you would earn if you bought a standard
senior callable debt security of the Company with the same maturity date. Your
investment may not reflect the full opportunity cost to you when you take into
account factors that affect the time value of money.
YOUR RETURN WILL NOT REFLECT THE RETURN OF OWNING THE STOCKS UNDERLYING THE
INDEX
Your return will not reflect the return you would realize if you
actually owned the stocks underlying the Index and received the dividends paid
on those stocks because STOXX calculates the Index by reference to the prices of
the common stocks comprising the Index without taking into consideration the
value of dividends paid on those stocks.
UNCERTAIN TRADING MARKET
The Notes are expected to be listed on the American Stock Exchange.
However, you cannot assume that a trading market will develop for the Notes. If
such a trading market does develop, there can be no assurance that there will be
liquidity in the trading market. The development of a trading market for the
Notes will depend on the financial performance of the Company, and other factors
such as the appreciation, if any, of the value of the Index and the U.S. dollar
relative to the ECU (initially, and after the introduction of the euro pursuant
to the Treaty, the euro). If the trading market for the Notes is limited, there
may be a limited number of buyers when you decide to sell your Notes if you do
not wish to hold your investment until maturity. The lack of an available
market for the Notes may adversely affect the price you receive. As a result,
you should be prepared to hold the Notes until maturity.
FACTORS AFFECTING TRADING VALUE OF THE NOTES
We believe that the market value of the Notes will be affected by the value
of the Index and by a number of other factors. Some of these factors are
interrelated in complex ways. As a result, the effect of any one factor may be
offset or magnified by the effect of another factor. The following paragraphs
describe the expected impact on the market value of the Notes given a change in
a specific factor, assuming all other conditions remain constant.
. USD INDEX VALUE. We expect that the market value of the Notes will
depend substantially on the amount by which the USD Index Value exceeds or
falls below the Benchmark USD Index Value. If you choose to sell your
Notes when the USD Index Value is below or not sufficiently above the
Benchmark USD Index Value, you may receive less than the principal amount
of your Note. Political, economic and other developments may also affect
the Underlying Securities and the value of the Notes.
. CURRENCY EXCHANGE RATE RISKS. The Closing USD Index Value for the Notes
depends upon the U.S. dollar/ECU exchange rate (and, after the introduction
of the euro pursuant to the Treaty, the U.S. dollar/euro exchange rate)
used to determine the Closing USD Index Value upon redemption or at
maturity. The value of one currency relative to another currency,
including the value of the U.S. dollar relative to the ECU (or euro),
PS-6
<PAGE>
may be affected by complex political and economic factors. The spot
exchange rates of the U.S. dollar in terms of the ECU (or euro) are at any
moment a result of the supply and demand for the two currencies (or, in the
case of the ECU, the supply of the component currencies), and changes in
the relative exchange rates result over time from the interaction of many
factors directly or indirectly affecting economic and political conditions
in the United States and Europe, including economic and political
developments in other countries.
. INTEREST RATES. We expect that the trading value of the Notes will be
affected by changes in interest rates. In general, because interest is
payable on the Notes at a fixed rate, if U.S. interest rates increase, we
expect that the trading value of the Notes will decrease. If U.S. interest
rates decrease, we expect the trading value of the Notes will increase.
. VOLATILITY OF THE INDEX. Volatility is the term used to describe the
size and frequency of market fluctuations. The volatility of the value of
the Index will depend upon the volatility of each of the Underlying
Securities as well as the volatility generally of the stock markets on
which the Underlying Securities are listed. If the volatility of the value
of the Index increases, we expect that the trading value of the Notes will
increase. If the volatility of the value of the Index decreases, we expect
that the trading value of the Notes will decrease.
. TIME REMAINING TO MATURITY. The Notes may trade at a value above that
which would be expected based on the level of interest rates and the Index.
This difference will reflect a "time premium" due to expectations
concerning the value of the Index during the period prior to maturity of
the Notes. However, as the time remaining to maturity of the Notes
decreases, we expect that this time premium will decrease, reducing the
trading value of the Notes.
. DIVIDEND YIELDS. If dividend yields on the stocks comprising the Index
increase, we expect that the value of the Notes will decrease. Conversely,
if dividend yields on the stock comprising the Index decrease, we expect
that the value of the Notes will increase.
. COMPANY CREDIT RATINGS. Actual or anticipated changes in the Company's
credit ratings may affect the market value of the Notes.
It is important for you to understand that the impact of one of the factors
specified above, such as an increase in interest rates, may offset some or all
of any increase in the trading value of the Notes attributable to another
factor, such as an increase in the value of the Index or USD Index Value.
The historical values of the Index should not be taken as an
indication of the future performance of the value of the Index during the term
of the Notes. While the trading prices of the stocks underlying the Index will
determine the value of the Index, it is impossible to predict whether the value
of the Index will rise or fall. Trading prices of the stocks underlying the
Index will be influenced by both the complex and interrelated political,
economic, financial and other factors that can affect the capital markets
generally and the equity trading markets on which the underlying stocks are
traded, and by various circumstances that can influence the values of the
underlying stocks in a specific market segment or a particular underlying stock.
In general, assuming all relevant factors are held constant, we expect that
the effect on the trading value of the Notes of a given change in most of the
factors listed above will be less if it occurs later in the term of the Notes
than if it occurs earlier in the term of the Notes.
PS-7
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RISKS RELATED TO THE UNDERLYING SECURITIES
The Underlying Securities that constitute the Index have been issued by
certain companies in various European countries. Investments in securities
indexed to the value of such country's equity securities involve certain risks
associated with the securities market in each such country, including the risks
of volatility in such markets, government intervention in such markets, cross-
shareholdings in companies in certain countries' legal requirements concerning
public information about companies in European countries that are less
exhaustive than similar requirements concerning companies that file reports with
the United States Securities and Exchange Commission and accounting and
financial standards that differ from country to country and from those
applicable to companies in the United States.
Securities prices in each country are subject to political, economic,
financial and social factors in that country that could negatively affect
securities markets in such country. Moreover, the economies in such countries
may differ favorably or unfavorably from economies in the United States in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resources and self-sufficiency.
VALUE OF THE INDEX MAY BE AFFECTED BY THE POLICIES OF STOXX
The policies of STOXX concerning additions, deletions and
substitutions of the stocks underlying the Index and the manner in which STOXX
takes account of certain changes affecting such underlying stocks may affect the
value of the Index. The policies of STOXX with respect to the calculation of
the Index could also affect the value of the Index. STOXX may discontinue or
suspend calculation or dissemination of the Index. Any such actions could affect
the value of the Notes. See "The Index" and "Discontinuance of the Index;
Adjustment to the Index" below.
STATE LAW LIMITS ON INTEREST PAID
New York State law governs the Indenture pursuant to which the Notes will
be issued. New York has certain usury laws that limit the amount of interest
that can be charged and paid on loans, which includes debt securities like the
Notes. Under present New York law, the maximum rate of interest is 25% per annum
on a simple interest basis. This limit may not apply to debt securities in which
$2,500,000 or more has been invested.
While we believe that New York law would be given effect by a state or
Federal court sitting outside of New York, many other states also have laws that
regulate the amount of interest that may be charged to and paid by a borrower.
We will promise, for the benefit of the holders of the Notes, to the extent
permitted by law, not to voluntarily claim the benefits of any laws concerning
usurious rates of interest.
PURCHASES AND SALES BY MERRILL LYNCH
The Company, MLPF&S and other affiliates of the Company may from time
to time buy or sell the stocks underlying the Index for their own accounts, for
business reasons or in connection with hedging the Company's obligations under
the Notes. These transactions could affect the price of such stocks and the
value of the Index in a manner that would be adverse to investors in the Notes.
POTENTIAL CONFLICTS
The Calculation Agent is a subsidiary of the Company, the issuer of
the Notes. Under certain circumstances, MLPF&S's role as a subsidiary of the
Company and its responsibilities as Calculation Agent for the Notes could give
rise to conflicts of interests. Such conflicts could occur, for instance, in
connection with the Calculation Agent's determination as to whether a Market
Disruption Event has occurred, or in connection with judgments that the
Calculation Agent would be required to make in the event of a discontinuance of
the Index. MLPF&S is required to carry out its duties as Calculation Agent in
good faith and using its reasonable judgment. However, you should be aware that
because the Calculation Agent is controlled by the Company, potential conflicts
of interest could arise.
The Company has entered into an arrangement with a subsidiary of the
Company to hedge the market risks associated with the Company's obligation to
pay the amount due at maturity. Such subsidiary expects to make a profit in
PS-8
<PAGE>
connection with such arrangement. The Company did not seek competitive bids for
such an arrangement from unaffiliated parties.
THE INDEX
All information regarding the Index set forth herein, including, without
limitation, its make-up, method of calculation and changes in its components,
has been derived from publicly available information. Such information reflects
the policies of, and are subject to change by, the publisher of the Index.
STOXX Ltd. does not have any obligation to continue to publish, and may
discontinue publication of, the Index.
While the Index consists of the common stock issued by European companies,
the Index is not intended to provide an indication of the pattern of price
movements of common stocks of European companies generally. See "Risk Factors
General" in this Pricing Supplement. THE INCLUSION OF AN UNDERLYING SECURITY IN
THE INDEX IS NOT A RECOMMENDATION TO BUY OR SELL SUCH UNDERLYING SECURITY AND
NEITHER THE COMPANY NOR ANY OF ITS AFFILIATES MAKE ANY REPRESENTATION TO ANY
PURCHASER OF NOTES AS TO THE PERFORMANCE OF THE INDEX.
ANY PROSPECTIVE PURCHASER OF A NOTE SHOULD UNDERTAKE AN INDEPENDENT
INVESTIGATION OF THE ISSUERS OF THE UNDERLYING SECURITIES AS IN ITS JUDGMENT IS
APPROPRIATE TO MAKE AN INFORMED DECISION WITH RESPECT TO AN INVESTMENT IN THE
NOTES.
The first phase of the European Monetary Union ("EMU") is expected to
be completed on January 1, 1999. The currency exchange rates between
participating countries will be irrevocably fixed and the new currency, the
euro, will become the currency of the member states. The eleven initial member
states included in EMU are: Austria, Belgium, Finland, France, Germany, The
Netherlands, Ireland, Italy, Luxembourg, Portugal and Spain. According to the
Economist Intelligence Unit, as of year end 1997, these eleven countries had a
combined GDP of approximately U.S. $6.30 trillion and a combined population of
290 million. According to Federation International des Bourses de Valeurs, their
combined equity market capitalization at year end 1997 was approximately U.S.
$2.98 trillion. Furthermore, Denmark, Greece, Sweden and the United Kingdom may
join the EMU at a later date.
The Index is currently denominated in ECU. The euro will be the currency
that is introduced at the start of the third stage of European economic and
monetary union pursuant to the Treaty establishing the European Community, as
amended by the Treaty on European Union (the "Treaty"). Because the
introduction of the euro will not commence until the start of such third stage,
all references in this Pricing Supplement shall be to the ECU. It is expected
that, when introduced pursuant to the Treaty, the euro will be introduced at the
rate of one euro for one ECU. STOXX also publishes an index related to the Dow
Jones EURO STOXX 50sm denominated in U.S. dollars. All reference herein to the
"Index" are to the Dow Jones EURO STOXX 50sm Index that is available under the
Bloomberg L.P. symbol "SX5E Index Go" and is currently calculated in ECU on a
price-return basis.
In order to provide a standard for measuring the stock market performance
of the blue chip companies in the countries expected to join EMU from its
inception, a new index, the Index was launched on February 26, 1998. The Index
consists of 50 stocks that are among the largest in market capitalization,
highest in liquidity and are the leaders of their industrial sectors. Set forth
below are the country weightings and industrial sector weightings of the
securities included in the Index as of November 24, 1998:
<TABLE>
<CAPTION>
Country Weightings: Industrial Sector Weightings:
<S> <C>
Germany 29.72% Bank/Financial Services/Insurance 28.48%
The Netherlands 22.75% Telecom/Technology/Media 24.52%
France 22.88% Energy/Utility/Industrial 22.20%
Italy 10.04% Consumer Non-Cyclical/Food & Beverages/
Spain 7.32% Pharmaceutical/Retail 11.45%
Belgium 3.34% Auto/Consumer Cyclical 7.51%
Finland 2.69% Chemical/Conglomerate/ Construction 5.84%
</TABLE>
PS-9
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Ireland 0.80%
Portugal 0.49%
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Source: Dow Jones
The Index was created by STOXX, a joint venture founded by SWX-Swiss
Exchange, SBF-Bourse de Paris, Deutsche Borse AG and Dow Jones. Publication of
the Index began on February 26, 1998, based on an initial value of the Index of
1,000 at December 31, 1991. The Index is published in The Wall Street Journal.
The Index is currently calculated by (i) multiplying the per share price of
each Underlying Security by the number of outstanding shares (and, if the stock
is not quoted in ECU (or, after introduction of the euro pursuant to the Treaty,
the euro), then multiplied by the country currency and an exchange factor which
reflects the exchange rate between the country currency and the ECU (or, after
introduction of the euro pursuant to the Treaty, the euro)) (ii) calculating the
sum of all these products (such sum being hereinafter the "Index Aggregate
Market Capitalization") and (iii) dividing the Index Aggregate Market
Capitalization by a divisor which represents the Index Aggregate Market
Capitalization on the base date of the Index and which can be adjusted to allow
changes in the issued share capital of individual Underlying Securities
(including the deletion and addition of stocks, the substitution of stocks,
stock dividends and stock splits) to be made without distorting the Index.
Because of such capitalization weighting, movements in share prices of the
Underlying Securities of companies with relatively greater market capitalization
will have a greater effect on the value of the entire Index than will movements
in share prices of the Underlying Securities of companies with relatively
smaller market capitalization.
A current list of the issuers of the Underlying Securities, as of November
24, 1998, is set forth below.
<TABLE>
<CAPTION>
Current Issuer of Underlying Securities Country Weight in Index Industry Sector
- ----------------------------------------------- ------------ --------------------- ---------------------
<S> <C> <C> <C>
ABN-AMRO Hldg NV The Netherlands 1.74% Bank
Aegon NV The Netherlands 3.72% Insurance
Ahold NV The Netherlands 1.18% Consumer-Non-Cyclical
Air Liquide SA France 0.84% Chemical
Akzo Nobel The Netherlands 0.70% Chemical
Alcatel Alsthom SA France 1.57% Technology
Allianz AG Germany 5.25% Insurance
Allied Irish Bank Plc Ireland 0.80% Bank
Assicurazioni Generali S.p.A Italy 2.29% Insurance
AXA-UAP SA The Netherlands 2.66% Insurance
Banco Bilbao Vizcaya SA Spain 1.93% Bank
Bayer AG Germany 1.83% Chemical
Carrefour France 1.63% Retail
Cie de St-Gobain France 0.80% Construction
DaimlerChrysler AG Germany 6.34% Auto
Deutsche Bank Germany 1.98% Bank
Deutsche Lufthansa AG Germany 0.49% Consumer Cyclical
Deutsche Telekom Germany 4.70% Telecom
Electrabel SA Belgium 1.26% Utility
ELF Aquitaine France 2.05% Energy
Elsevier NV The Netherlands 0.52% Media
Endesa SA Spain 1.49% Utility
ENI S.p.A. Italy 2.96% Energy
Fiat S.p.A. Italy 0.67% Auto
Fortis AG Belgium 1.51% Financial Services
France Telecom France 4.15% Telecom
ING Groep NV The Netherlands 3.22% Financial Services
Koninklijke KPN NV The Netherlands 1.23% Telecom
L'Oreal France 2.52% Consumer Non-Cyclical
LVMH Moet-Hennesey Louis Vuitton France 1.03% Food & Beverage
</TABLE>
PS-10
<PAGE>
<TABLE>
<CAPTION>
Current Issuer of Underlying Securities Country Weight in Index Industry Sector
- ----------------------------------------------- ------------ --------------------- ---------------------
<S> <C> <C> <C>
Mannesmann AG Germany 2.52% Industrial
Metro AG Germany 1.00% Retail
Nokia Ab Oy A Finland 2.69% Technology
Paribas France 0.85% Financial Services
Petrofina SA Belgium 0.57% Energy
Philips Electronics NV The Netherlands 1.31% Technology
Portugal Telecom SA Portugal 0.49% Telecom
Repsol SA Spain 1.02% Energy
Rhone-Poulenc SA France 1.11% Pharmaceutical
Royal Dutch Petroleum The Netherlands 6.14% Energy
RWE AG Germany 1.49% Utility
Schneider SA France 0.56% Industrial
Siemens AG Germany 2.44% Technology
Societe Generale France 0.96% Bank
Telecom Italia Italy 2.54% Telecom
Telefonica de Espana Spain 2.88% Telecom
Unicredito Italiano Italy 1.58% Bank
Unilever NV The Netherlands 2.99% Food & Beverage
Veba AG Germany 1.68% Conglomerate
Vivendi France 2.15% Utility
</TABLE>
[Copyright] 1998 STOXX LTD.
________________
(Source: Dow Jones)
The composition of the Index is reviewed annually, and changes are
implemented on the third Friday in September, using market data from the end of
July as the basis for the review process. Changes in the composition of the
Index are made to ensure that the index includes those companies which, within
the eligible countries and within each industry sector, have the greatest market
capitalization. Changes in the composition of the Index are made entirely by
STOXX without consultation with the corporations represented in the Index
or the Company. The Index is also reviewed on an ongoing basis, and change in
the composition of the Index may be necessary if there have been extraordinary
events for one of the issuers of the Underlying Securities (e.g. delisting,
bankruptcy, merger, takeover, etc.). In these cases, the event is taken into
account as soon as it is effective. The Underlying Securities may be changed at
any time for any reason. Neither STOXX nor any of its founders is affiliated
with the Company and has participated in any way in the creation of the Notes.
The table below summarizes the adjustments to any component stock made for
corporate actions and the effect of such adjustment on the base value, where "p"
is the price of such component stock and "q" is the number of shares of such
stock.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
IMPACT ON EVENTS Adjustment Factor Base value
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Special cash dividend p before dividend - dividend Decrease
(from non-operating ----------------------------
income) adj. for p = p before dividend
- ---------------------------------------------------------------------------------------------
Stock Dividend & 1 None
Split (the same -----------------
security) adj. for p = 1 + no. of new shares (%)
adj. for q = 1 + no. of new shares (%)
- -------------------------------------------------------------------------------------------------------------------------
Reverse Split 1 None
-----------------
</TABLE>
PS-11
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
IMPACT ON EVENTS Adjustment Factor Base value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
adj. for p = 1 no. of new shares (%)
adj. for q = 1 no. of new shares (%)
- -------------------------------------------------------------------------------------------------------------------------
Stock Dividend of a p before distribution - cash equivalent Decrease
different company ---------------------------------------
security adj. for p = p before distribution
cash equivalent = other sec.p x no. of distributed stocks (%)
- -------------------------------------------------------------------------------------------------------------------------
Rights Offering adj. p Increase
------------------
adj. for p = last cum rights p
last cum rights p + subscription p x rights (%)
-----------------------------------------------
adj. p = 1 + rights (%)
adj. for q = 1 + rights (%)
If the new shares have a dividend disadvantage, then the subscription price will
be adjusted.
- -------------------------------------------------------------------------------------------------------------------------
Combination: adj. p Increase
------------------
adj. for p = last cum rights p
stock distribution last cum rights p + subscription p x (1 + stock subscription (%)) x rights (%)
(stock dividend or ------------------------------------------------------------------------------
split) and rights adj. p = (1 + stock distribution (%)) (1 + rights (%))
offering one action
applicable to other
(if rights
applicable after adj. for q = (1 + stock distribution (%))(1 + rights (%))
stock distribution)
- -------------------------------------------------------------------------------------------------------------------------
Combination: adj. p Increase
------------------
adj. for p = last cum rights p
stock distribution
(stock dividend or last cum rights p - subscription p x rights (%)
split) and rights -----------------------------------------------
offering one action adj. p = (1 + rights (%)) x (1 + stock distribution (%))
applicable to other
(if stock
distribution
applicable after
rights) adj. for q = (1 + stock distribution (%))(1 + rights (%))
- -------------------------------------------------------------------------------------------------------------------------
Combination: adj. p Increase
------------------
adj. for p = last cum rights p
stock distribution
(stock dividend or last cum rights p + subscription p x rights (%)
split) and rights -----------------------------------------------
issues neither adj. p = (1 + rights (%) + stock distribution (%))
action is applicable
to the other
adj. for q = (1 + stock distribution (%) + rights (%))
- -------------------------------------------------------------------------------------------------------------------------
Spin-off p before spinoff - cash equivalent Decrease
----------------------------------
</TABLE>
PS-12
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
IMPACT ON EVENTS Adjustment Factor Base value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
adj. for p = p before spinoff
cash equivalent = spunoff stock p x no. of spunoff stocks (in %)
- -------------------------------------------------------------------------------------------------------------------------
Repurchase shares- p after tender Decrease
self tender --------------
adj. for p = p before tender
(p before tender) x (no. of q before tender) - (tender p x no. of tendered q)
-----------------------------------------------------------------------------
p after tender = (no. of q before tender) - no. of tendered q
no. of q after tender
-----------------------
adj. q = no. of q before tender
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company or its affiliates may presently or from time to time engage
in business with the publishers, owners, founders or creators of the Index or
any of its successors or one or more of the issuers of Underlying Securities,
including extending loans to, making equity investments in or providing advisory
services, including merger and acquisition advisory services, to such
publishers, their successors, founders or creators or to any of such issuers. In
the course of such business with issuers, the Company or its affiliates may
acquire non-public information with respect to such issuers. The Company may
also act as market maker for the common stocks of such issuers. The Company does
not make any representation to any purchaser of Notes with respect to any
matters whatsoever relating to any of such publishers, their successors,
founders or creators or to any of such issuers. Any prospective purchaser of
Notes should undertake such an independent investigation of the issuers of the
Underlying Securities and with respect to the competency of its publisher to
formulate and calculate the Index as in its judgment is appropriate to make an
informed decision with respect to an investment in the Notes. The composition of
the Index does not reflect any investment or sell recommendations of the Company
or its affiliates.
A representative of an affiliate of the Company may from time to time be
a member of the STOXX Limited Advisory Committee. STOXX states in its Guide to
the Dow Jones STOXX Indexes that STOXX's Advisory Committee advises the
Supervisory Board on matters relating to the indexes. This advisory committee
proposes changes of the composition of the indexes to the Supervisory Board and
makes recommendations with respect to the accuracy and transparency of the index
computation. Decisions on the composition and changes in STOXX's blue chip
indexes are reserved to the Supervisory Board.
DISCONTINUANCE OF THE INDEX; ADJUSTMENTS TO THE INDEX
If STOXX discontinues publication of the Index and STOXX or another
entity publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to the discontinued Index
(such index being referred to herein as a "Successor Index"), then, upon the
Calculation Agent's notification of such determination to the Trustee and the
Company, the Calculation Agent will substitute the Successor Index as calculated
by STOXX or such other entity for the Index.
Upon any selection by the Calculation Agent of a Successor Index, the
Company will cause written notice thereof to be furnished to the holders of the
Notes.
If STOXX discontinues publication of the Index and a Successor Index is
not selected by the Calculation Agent or is no longer published, the value to be
substituted for the value of the Index for use in calculating the Closing Index
Value or Closing USD Index Value at any time will be a value computed by the
Calculation Agent in accordance with the procedures last used to calculate the
value of the Index prior to such discontinuance. If a Successor Index is
selected or the Calculation Agent calculates a value as a substitute for the
value of the Index, such Successor Index or value shall be substituted for the
value of the Index for all purposes, including for purposes of determining
whether a Market Disruption
PS-13
<PAGE>
Event exists. The Calculation Agent will cause notice of each such value to be
published not less often than once each month in The Wall Street Journal (or
another newspaper of general circulation), and arrange for information with
respect to such values to be made available by telephone. Notwithstanding these
alternative arrangements, discontinuance of the publication of the Index may
adversely affect trading in the Notes and the listing of the Notes on an
exchange.
If at any time the method of calculating the Index, or the value thereof,
is changed in any material respect, or if the Index is in any other way modified
so that such Index does not, in the opinion of the Calculation Agent, fairly
represent the value of the Index had such changes or modifications not been
made, then, from and after such time, the Calculation Agent shall, at the close
of business in New York, New York, on each date that the closing value with
respect to the Closing USD Index Value is to be calculated, make such
adjustments as, in the good faith judgment of the Calculation Agent, may be
necessary in order to arrive at a calculation of a value of a stock index
comparable to the Index as if such changes or modifications had not been made,
and calculate such closing value with reference to the Index, as adjusted.
Accordingly, if the method of calculating the Index is modified so that the
value of such Index is a fraction or a multiple of what it would have been if it
had not been modified (e.g., due to a split in the Index), then the Calculation
Agent shall adjust such Index in order to arrive at a value of the Index as if
it had not been modified (e.g., as if such split had not occurred).
DATA ON THE INDEX
The following table sets forth the high and low daily closing values, as
well as end-of-quarter closing values, of the Index (price return) for each
quarter in the period from January 1, 1993 through November 24, 1998. Although
publication of the Index began on February 26, 1998, historical levels of the
Index have been calculated by STOXX from a base date of December 31, 1991. The
historical values of the Index should not be taken as an indication of future
performance, and no assurance can be given as to the level of the Index as of
any Determination Date.
<TABLE>
<CAPTION>
Daily Closing Values in ECU
- ------------------------------------------------------------------------------------------------------------------------------------
High Low Period End
------------------- ------------------- -------------------
<S> <C> <C> <C>
1993
1st Quarter.................................. 1148.63 1014.66 1140.82
2nd Quarter.................................. 1161.96 1102.94 1157.58
3rd Quarter.................................. 1321.88 1144.93 1285.92
4th Quarter.................................. 1433.34 1287.49 1433.34
1994
1st Quarter.................................. 1459.27 1347.84 1365.74
2nd Quarter.................................. 1441.33 1272.00 1284.60
3rd Quarter.................................. 1401.79 1286.05 1302.53
4th Quarter.................................. 1344.61 1268.62 1320.59
1995
1st Quarter.................................. 1348.10 1274.57 1300.13
2nd Quarter.................................. 1400.60 1298.18 1362.52
3rd Quarter.................................. 1469.19 1371.32 1419.60
4th Quarter.................................. 1509.91 1367.15 1506.82
1996
1st Quarter.................................. 1612.24 1507.65 1612.24
2nd Quarter.................................. 1691.04 1619.33 1665.90
3rd Quarter.................................. 1694.51 1563.32 1694.51
4th Quarter.................................. 1859.10 1693.99 1850.32
1997
1st Quarter.................................. 2169.71 1824.52 2137.28
2nd Quarter.................................. 2438.38 2026.91 2398.41
3rd Quarter.................................. 2699.78 2407.58 2581.36
4th Quarter.................................. 2641.68 2241.21 2531.99
1998
1st Quarter.................................. 3179.72 2466.81 3153.32
2nd Quarter.................................. 3443.70 3061.00 3406.80
</TABLE>
PS-14
<PAGE>
<TABLE>
<S> <C> <C> <C>
3rd Quarter.................................. 3670.80 2658.20 2670.90
4th Quarter (through 3194.10 2419.20 3163.80
November 24, 1998)...........................
___________________
(Source: Bloomberg and Dow Jones)
</TABLE>
The Closing USD Index Value is determined by multiplying the Closing Index
Value by the Noon Buying Rate on any specified Trading Day. Parity, whether
determined at redemption or at maturity, will be based on the Closing USD Index
Value. See, also, "Risk Factors--Factors Affecting Trading Value of the Notes--
Currency Exchange Rate Risks" and "The Amount Payable at Maturity."
LICENSE AGREEMENT
STOXX Ltd. and the Company have entered into a non-exclusive license agreement
providing for the license to ML & Co., in exchange for a fee, of the right to
use the Index, which is owned and published by STOXX, in connection with certain
securities, including the Notes.
The license agreement between STOXX and the Company provides that the
following language must be set forth in this Pricing Supplement:
The Notes are not sponsored, endorsed, sold or promoted by STOXX or Dow
Jones. Neither STOXX nor Dow Jones makes any representation or warranty,
express or implied, to the owners of the Notes or any member of the public
regarding the advisability of investing in securities generally or in the Notes
particularly. The only relationship of STOXX to the Company is as the licensor
of the Dow Jones STOXXSM , the Dow Jones EURO STOXX 50SM and of certain
trademarks, trade names and service marks of STOXX, and as the sublicensor of
the Dow Jones STOXXSM, the Dow Jones EURO STOXXSM and of certain trademarks,
trade names and service marks of Dow Jones. The aforementioned indexes are
determined, composed and calculated by STOXX or Dow Jones, as the case may be,
without regard to the Company or the Notes. Neither STOXX nor Dow Jones is
responsible for or has participated in the determination of the timing of,
prices at, or quantities of the Notes to be issued or in the determination or
calculation of the equation by which the Notes are to be converted into cash.
Neither STOXX nor Dow Jones has any obligation or liability in connection with
the administration, marketing or trading of the Notes.
NEITHER STOXX NOR DOW JONES GUARANTEES THE ACCURACY AND/OR THE
COMPLETENESS OF THE INDEXES OR ANY DATA INCLUDED THEREIN AND NEITHER SHALL HAVE
ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. NEITHER
STOXX NOR DOW JONES MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE
OBTAINED BY THE COMPANY, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY FROM
THE USE OF THE INDEXES OR ANY DATA INCLUDED THEREIN. NEITHER STOXX NOR DOW
JONES MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL
WARRANTIES, OR MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF
THE FOREGOING, IN NO EVENT SHALL EITHER STOXX OR DOW JONES HAVE ANY LIABILITY
FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES,
EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY
BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN STOXX AND THE COMPANY.
The Dow Jones EURO STOXX 50 is owned by STOXX Ltd. and is a service mark of
Dow Jones & Company, Inc., and has been licensed for certain purposes by the
Company. [Copyright] 1998 by STOXX Ltd. All rights reserved.
PS-15
<PAGE>
USE OF PROCEEDS AND HEDGING
The net proceeds to be received by the Company from the sale of the Notes
will be used for general corporate purposes and, in part, by the Company or one
or more of its affiliates in connection with hedging the Company's obligations
under the Notes. See also "Use of Proceeds" in the accompanying Prospectus.
The Company has entered into hedging arrangements related to the
Underlying Securities with an affiliate of the Company, in connection with the
Company's obligations under the Notes. In connection therewith, such affiliate
has purchased shares of the Underlying Securities in secondary market
transactions at or before the time of the pricing of the Notes. The Company,
MLPF&S and other affiliates of the Company may from time to time buy or sell
shares of the Underlying Securities, and execute currency transactions, for
their own accounts for business reasons or in connection with hedging the
Company's obligations under the Notes. The Company believes that it is unlikely
that such transactions will affect the price of the shares of the Underlying
Securities, the value of the Index or the Closing USD Index Value.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion supplements the discussion contained in the
accompanying Prospectus Supplement under the caption "Certain United States
Federal Income Tax Considerations."
GENERAL
There are no statutory provisions, regulations, published rulings or
judicial decisions addressing or involving the characterization, for United
State Federal income tax purposes, of the Notes or other instruments with terms
substantially the same as the Notes. However, although the matter is not free
from doubt, under current law, each Note should be treated as a debt instrument
of the Company for United States Federal income tax purposes. The Company
currently intends to treat each Note as a debt instrument of the Company for
United States Federal income tax purposes and, where required, intends to file
information returns with the Internal Revenue Service ("IRS") in accordance with
such treatment, in the absence of any change or clarification in the law, by
regulation or otherwise, requiring a different characterization of the Notes.
Prospective investors in the Notes should be aware, however, that the IRS is not
bound by the Company's characterization of the Notes as indebtedness and the IRS
could possibly take a different position as to the proper characterization of
the Notes for United States Federal income tax purposes. The following
discussion of the principal United States Federal income tax consequences of the
purchase, ownership and disposition of the Notes is based upon the assumption
that each Note will be treated as a debt instrument of the Company for United
States Federal income tax purposes. If the Notes are not in fact treated as
debt instruments of the Company for United States Federal income tax purposes,
then the United States Federal income tax treatment of the purchase, ownership
and disposition of the Notes could differ from the treatment discussed below
with the result that the timing and character of income, gain or loss recognized
in respect of a Note could differ from the timing and character of income, gain
or loss recognized in respect of a Note had the Notes in fact been treated as
debt instruments of the Company for United States Federal income tax purposes.
U.S. HOLDERS
On June 11, 1996, the Treasury Department issued final regulations (the
"Final Regulations") concerning the proper United States Federal income tax
treatment of contingent payment debt instruments. However, the Final
Regulations generally do not apply to contingent payment debt instruments that
provide for any payments the amount of which are determined by reference to the
value of one or more foreign currencies. Accordingly, the Final Regulations
will not apply to the Notes. Rather, the Notes will be taxed according to the
rules applicable to foreign currency denominated debt instruments, which are
contained in Section 988 of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations thereunder, and general principles of current
United States Federal income tax law.
Under general principles of current United States Federal income tax law,
payments of interest on a debt instrument generally will be taxable to a U.S.
Holder as ordinary income at the time such payments are accrued or are received
(in accordance with the U.S. Holder's regular method of tax accounting). In
addition, under Section 988 of the Code, any gain realized on a debt instrument
which is attributable to changes in the value of a foreign currency generally
will be treated as ordinary income. Under these principles, a U.S. Holder will
include the fixed payments of interest at a rate equal to 1.5% per annum on the
Notes in income in accordance with the U.S. Holder's regular method of
accounting for United States Federal income tax purposes. In addition, the
amount payable on redemption or at maturity of a Note in excess of the principal
amount thereof (i.e., the amount by which Parity exceeds Par), if any, generally
would be includible in income by a U.S. Holder as ordinary income on the date
that the Parity amount is accrued (i.e., generally when the Parity amount
becomes fixed in amount and becomes unconditionally payable) or when such amount
is received (in accordance with the U.S. Holder's regular method of tax
accounting).
PS-16
<PAGE>
Upon the sale or exchange of a Note prior to maturity, a U.S. Holder
generally would recognize taxable gain or loss in an amount equal to the
difference between the amount realized on the sale or exchange and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in
a Note generally will equal such U.S. Holder's initial investment in the Note.
Any such gain or loss realized upon the sale or exchange of a Note that is
attributable to changes in the ECU/USD Exchange Rate should be treated as
ordinary income or loss under Section 988 of the Code. Any remaining taxable
gain or loss will be short-term capital gain or loss if the Note has been held
for one year or less as of the date of disposition, or will be long-term capital
gain or loss if the Note has been held for more than one year as of the date of
disposition.
PS-17
<PAGE>
ANNEX A
OFFICIAL NOTICE
Dated: [On or after December 3, 1998]
--------------------------------------
Merrill Lynch & Co., Inc.
World Financial Center
South Tower, 5th Floor
New York, New York 10080-6105
Attn: Debt Administration
Fax: 212-236-3865
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
as Calculation Agent
World Financial Center
North Tower, 5th Floor
New York, New York 10281-1305
Attn: Operations
Fax: 212-449-2697
Dear Sirs:
The undersigned Holder of the Medium Term Notes, Series B, 1.5% Principal
Protected Notes due December 15, 2005 (Linked to the performance of Dow Jones
EURO STOXX 50 SM Index) of Merrill Lynch & Co., Inc. (the "Notes") hereby
irrevocably elects to exercise with respect to the principal amount of the Notes
indicated below, as of the date hereof (or, if this letter is received after
4:00 P.M. on any Business Day or on a day that is not a Business Day, as of the
next Business Day) the Holder's Optional Redemption as described in Pricing
Supplement dated November 24, 1998 (the "Pricing Supplement") to the Prospectus
Supplement and Prospectus dated July 30, 1998. Capitalized terms not defined
herein have the meanings given to such terms in the Pricing Supplement. Please
date and acknowledge receipt of this notice in the place provided below on the
date of receipt, and fax a copy to the fax number indicated. The Company will
deliver a cash amount equal to Parity, subject to certain conditions set forth
in the Pricing Supplement, on the third Business Day after the Determination
Date with respect to the Holder's exercise of this Holder's Optional Redemption.
The Holder acknowledges that this Official Notice will lapse and be of no effect
if, with respect to the Determination Date in connection with the calculation of
Parity, (i) a Market Disruption Event shall have occurred for two consecutive
Trading Days or (ii) on the applicable Determination Date, Parity is less than
or equal to Par.
Very truly yours,
-----------------------------------
[Name of Holder]
By:
-----------------------------------
[Title]
-----------------------------------
[Fax No.]
$
---------------------------------
Principal Amount of Notes
to be surrendered for redemption
PS-18
<PAGE>
Receipt of the above Official
Notice is hereby acknowledged
MERRILL LYNCH & CO., INC., as Issuer
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
as Calculation Agent
By: Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Calculation Agent
BY:
-----------------------------
TITLE:
Date and time of acknowledgement
----------
PS-19
