RULE NO. 424(b)(5)
REGISTRATION NO. 333-68747
PROSPECTUS
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Merrill Lynch & Co., Inc.
Energy Select Sector SPDR(R) Fund
Market Index Target-Term Securities(R) due February 21, 2006
"MITTS(R) Securities"
$10 principal amount per unit
This prospectus is to be used by Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, our wholly-owned subsidiary, when making
offers and sales related to market-making transactions in the MITTS
Securities.
The MITTS Securities:
o 100% principal protection at maturity
o No payments prior to the maturity date
o Senior unsecured debt securities of Merrill Lynch & Co, Inc.
o Linked to the value of the Energy Select Sector SPDR Fund
o The MITTS Securities are listed on the American Stock Exchange under
the symbol "ESM"
Payment at Maturity:
o On the maturity date, for each unit of the MITTS Securities you own, you
will receive a number of shares of the Energy Select Sector SPDR Fund, or
cash with an equal value, equal to the sum of the principal amount of
each unit and an additional amount based on any percentage increase in
the value of the fund as described in this prospectus
o You will receive no less than the principal amount of your MITTS Securities
Investing in the MITTS Securities involves risk.
See "Risk Factors" beginning on page 8 of this prospectus.
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Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
The sale price of the MITTS Securities will be the prevailing market
price at the time of sale.
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Merrill Lynch & Co.
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The date of this prospectus is June 24, 1999.
"MITTS" and "Market Index Target-Term Securities" are registered service marks
owned by Merrill Lynch & Co., Inc.
TABLE OF CONTENTS
Page
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SUMMARY INFORMATION--Q&A......................................................3
RISK FACTORS..................................................................8
MERRILL LYNCH & CO., INC. ...................................................13
RATIO OF EARNINGS TO FIXED CHARGES...........................................14
DESCRIPTION OF THE MITTS SECURITIES..........................................15
THE ENERGY SPDR FUND.........................................................23
OTHER TERMS..................................................................25
PROJECTED PAYMENT SCHEDULE...................................................28
WHERE YOU CAN FIND MORE INFORMATION..........................................29
INCORPORATION OF INFORMATION WE FILE WITH THE SEC............................30
PLAN OF DISTRIBUTION.........................................................31
EXPERTS......................................................................31
SUMMARY INFORMATION--Q&A
This summary includes questions and answers that highlight selected
information from the prospectus to help you understand The Energy Select
Sector SPDR(R) Fund Market Index Target-Term Securities(R) due February 21,
2006. You should carefully read this prospectus to understand fully the terms
of the MITTS Securities as well as the tax and other considerations that
should be important to you in making a decision about whether to invest in the
MITTS Securities. You should carefully review the "Risk Factors" section,
which highlights some risks associated with an investment in the MITTS
Securities, to determine whether an investment in the MITTS Securities is
appropriate for you.
References to "ML&Co.", "we", "us" and "our" are to Merrill Lynch &
Co., Inc.
References in this prospectus to "MLPF&S" are to Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
References in this prospectus to "Energy SPDR Fund" are to the Energy
Select Sector SPDR Fund.
We have attached the prospectus for the Energy SPDR Fund. You should
carefully read the Fund Prospectus to fully understand the operation and
management of the Energy SPDR Fund, particularly the fees and expenses
associated with shares of the Energy SPDR Fund which affect the Net Asset
Value per share of the Energy SPDR Fund and which will directly apply to you
if we choose to deliver these shares to you at maturity of the MITTS
Securities. Our affiliate, MLPF&S, is both a soliciting dealer in the shares
of the Energy SPDR Fund and the index compilation agent for the Energy Select
Sector Index . However, we are not affiliated with the Energy SPDR Fund or the
Energy Select Sector Index. The Energy SPDR Fund will not receive any of the
proceeds from the sale of the MITTS Securities and will not have any
obligations with respect to the MITTS Securities. We have attached the Fund
Prospectus and are delivering it to you together with this prospectus for the
convenience of reference only. The Fund Prospectus does not constitute a part
of prospectus, nor is it incorporated by reference in this prospectus.
What are the MITTS Securities?
The MITTS Securities are a series of senior debt securities issued by
ML&Co. and are not secured by collateral. The MITTS Securities rank equally
with all of our other unsecured and unsubordinated debt. The MITTS Securities
will mature on February 21, 2006 and cannot be redeemed at an earlier date.
You will not receive any shares of the Energy SPDR Fund or any other payments
on the MITTS Securities until maturity.
Each "unit" of MITTS Securities represents $10 principal amount of
MITTS Securities. You may transfer the MITTS Securities only in whole units.
You will not have the right to receive physical certificates evidencing your
ownership except under limited circumstances. Instead, the MITTS Securities
were issued in the form of a global certificate, which is held by The
Depository Trust Company, also known as DTC, or its nominee. Direct and
indirect participants in DTC record beneficial ownership of the MITTS
Securities by individual investors. You should refer to the section
"Description of the MITTS Securities--Depositary" in this prospectus.
What will I receive at the stated maturity date of the MITTS Securities?
We have designed the MITTS Securities for investors who want to
protect their investment by receiving at least the principal amount of their
investment at maturity and who also want to participate in the appreciation,
if any, in the Net Asset Value per share of the Energy SPDR Fund. At maturity,
you will receive a number of shares, and an amount of cash equal to the value
of any fractional shares, of the Energy SPDR Fund, or cash with an equal
value, equal in value to the sum of the Principal Amount and the Supplemental
Redemption Amount, if any. We will determine the number of shares to be
delivered to you based on the Ending Value.
Principal Amount
The Principal Amount per unit is $10.
Supplemental Redemption Amount
The Supplemental Redemption Amount per unit will equal:
( Adjusted Ending Value-Starting Value )
$10 X ( ------------------------------------ )
( Starting Value )
but will not be less than zero.
"Starting Value" equals 22.4936, the Net Asset Value of one share of
the Energy SPDR Fund on February 11, 1999, the date the MITTS Securities were
priced for initial sale to the public.
"Adjusted Ending Value" means the Ending Value, as reduced by the
application of the Adjustment Factor on each calculation day.
"Ending Value" means the average of the Net Assets Values per share
of the Energy SPDR Fund at the close of the market on five Calculation Days
shortly before the maturity of the MITTS Securities. We may calculate the
Ending Value by reference to fewer than five or even a single day's Net Asset
Value if, during the calculation period, there is a disruption in the trading
of a number of the component stocks of the Energy Select Sector Index or
options relating to the shares of the Energy SPDR Fund, the Energy SPDR Fund
is unable or otherwise fails to issue a Net Asset Value for the shares of the
Energy SPDR Fund or the Energy SPDR Fund suspends the creation or redemption
of its shares. Please see the section entitled "Description of the MITTS
Securities--Adjustments to the Net Asset Value; Market Disruption Events" in
this prospectus.
The "Adjustment Factor" equals 0.85% per year and will reduce the Net
Asset Value per share of the Energy SPDR Fund used to calculate the
Supplemental Redemption Amount. As a result of the application of the
Adjustment Factor, the adjusted Net Asset Value per share of the Energy SPDR
Fund used to calculate your Supplemental Redemption Amount at the maturity of
the MITTS Securities will be approximately 5.8% less than the actual Net Asset
Value per share of the Energy SPDR Fund on any day during the Calculation
Period. For a detailed discussion of how the Adjustment Factor will affect the
Net Asset Value per share of the Energy SPDR Fund used to calculate your
Supplemental Redemption Amount, i.e., the Adjusted Ending Value, see
"Description of the MITTS Securities--Delivery at Maturity" and
"--Hypothetical Returns" in this prospectus.
For more specific information about the Supplemental Redemption
Amount, please see the section "Description of the MITTS Securities" in this
prospectus.
Examples
Here are two examples of Supplemental Redemption Amount calculations
assuming an Adjustment Factor of 0.85% per year:
Example 1--Adjusted Ending Value is less than the Starting Value at the
maturity date:
Starting Value: 22.49
Hypothetical Ending Value: 23.62
Hypothetical Adjusted Ending Value: 22.25
<TABLE>
<CAPTION>
<S> <C> <C>
(Supplemental
( 22.25 - 22.49 ) Redemption Amount
Supplemental Redemption Amount (per unit) = $10 X ( ------------- ) = $0.00 Amount cannot
( 22.49 ) be less than zero)
</TABLE>
Total value of shares delivered at maturity (per unit) = $10 + $0 = $10
Example 2--Adjusted Ending Value is greater than the Starting Value at the
maturity date:
Starting Value: 22.49
Hypothetical Ending Value: 35.99
Hypothetical Adjusted Ending Value: 33.90
( 33.90 - 22.49 )
Supplemental Redemption Amount (per unit) = $10 X ( ------------- ) = $5.07
( 22.49 )
Total value of shares delivered at maturity (per unit) = $10 + $5.07 =
$15.07
How is the Net Asset Value determined?
The "Net Asset Value" means the net asset value per share of the
Energy SPDR Fund as determined by the Energy SPDR Fund. The Energy SPDR Fund
calculates its Net Asset Value per share by dividing the value of its net
assets, i.e., the value of its total assets less total liabilities, by its
total number of shares outstanding. Expenses and fees, including the
management, administration and distribution fees, of the Energy SPDR Fund are
accrued daily and taken into account for purposes of determining Net Asset
Value. The Net Asset Value per share of the Energy SPDR Fund is determined by
the Energy SPDR Fund each Business Day after the close of trading on the New
York Stock Exchange, ordinarily 4:00 p.m., New York time. Shares of the Energy
SPDR Fund are listed on the AMEX under the trading symbol "XLE".
When will I receive cash instead of shares of the Energy SPDR Fund?
If we choose to pay you the amount due to you at maturity in cash
instead of in shares of the Energy SPDR Fund which you would otherwise be
entitled to receive, we will pay you an amount of cash equal to the sum of the
Principal Amount and the Supplemental Redemption Amount, if any. In addition,
if at any time MLPF&S ceases to be a soliciting dealer in the shares of the
Energy SPDR Fund, we will pay the amount due to you in cash instead of shares.
Please see the section entitled "Description of the MITTS Securities--Delivery
at Maturity" in this prospectus.
In addition, in the event that we choose to deliver shares of the
Energy SPDR Fund at maturity, we will not distribute any fractional shares to
you. We will aggregate all amounts due to you in respect of the total number
of units you hold on the stated maturity date, and in lieu of delivering to
you any fractional shares of the Energy SPDR Fund to which you would otherwise
be entitled, we will pay you the cash value of these fractional shares based
on the Net Asset Value per share of the Energy SPDR Fund shortly before
maturity.
Will I be charged any transaction fees or expenses with respect to the shares
of the Energy SPDR Fund?
Unless and until we deliver shares of the Energy SPDR Fund to you in
satisfaction of our obligations under the MITTS Securities, you will not be
directly charged any management, administration, distribution or other
transaction fees or other expenses with respect to the shares of the Energy
SPDR Fund. However, because the Energy SPDR Fund accrues these fees and
expenses daily for purposes of determining the Net Asset Value of its shares,
the Net Asset Values used to calculate your Supplemental Redemption Amount
will reflect the deduction of these fees and expenses as well as the reduction
resulting from the application of the Adjustment Factor.
If at maturity we deliver to you shares of the Energy SPDR Fund, you
will then become directly subject to ongoing account maintenance fees and some
other transaction expenses with respect to your shares so long as you hold
these shares.
The accompanying Fund Prospectus describes the fees and expenses
charged by the Energy SPDR Fund in greater detail.
What is the Energy SPDR Fund?
The Energy SPDR Fund is an index fund whose stated investment
objective is to provide investment results that, before expenses, correspond
generally to the price and yield performance of the publicly traded equity
securities comprising the Energy Select Sector Index. The Energy Select Sector
Index consists of the equity securities of publicly traded companies that are
components of the S&P 500 Index and are involved in the development and
production of energy products. Companies in the Energy Select Sector Index
develop and produce crude oil and natural gas, and provide drilling and other
energy related services. As of February 11, 1999, the Energy Select Sector
Index included 31 component stocks. A list of these securities and their index
weightings as of that date is set forth under the section "The Energy SPDR
Fund" in this prospectus. Our affiliate, MLPF&S, is both a soliciting dealer
in the shares of the Energy SPDR Fund and the Index Compilation Agent for the
Energy Select Sector Index. We are not affiliated with the Energy SPDR Fund or
the Energy Select Sector Index. The Energy SPDR Fund does not receive any of
the proceeds from the sale of, or have any obligations under, the MITTS
Securities. You should independently decide whether an investment in the MITTS
Securities and the Energy SPDR Fund is appropriate for you.
The Energy SPDR Fund is one of nine investment funds comprising the
Select Sector SPDR Trust (the "Trust"), a management investment company
registered under the Investment Company Act of 1940, as amended. Each fund's
investment portfolio is comprised principally of constituent companies whose
equity securities are components of the S&P 500 Index, each representing one
of nine specified market sector indices. Each stock in the S&P 500 Index is
allocated to only one Select Sector Index. The combined companies of the nine
Select Sector Indices represent all of the companies whose stocks are
components of the S&P 500 Index.
You should carefully read the Fund Prospectus accompanying this
prospectus to fully understand the operation and management of the Energy SPDR
Fund. In addition, because the Trust is subject to the registration
requirements of the Securities Act of 1933, as amended, and the Investment
Company Act, the Trust is required to file periodically information specified
by the SEC. For more information about the Energy SPDR Fund and the shares
that you may receive at maturity, information provided to or filed with the
SEC by the Trust can be inspected at the SEC's public reference facilities or
accessed over the Internet through a web site maintained by the SEC at
http://www.sec.gov. You may also obtain copies of these documents at no cost
by calling the Trust at (800) 843-2639 or by writing the Trust c/o ALPS Mutual
Funds Services, Inc., at 370 17th Street, Suite 3100, Denver, CO 80202.
Neither the Fund Prospectus nor these other documents are incorporated by
reference in this prospectus, and we make no representation or warranty as to
the accuracy or completeness of that information.
Are the MITTS Securities listed on a stock exchange?
The MITTS Securities are listed on the AMEX under the symbol "ESM".
What is the role of MLPF&S?
Our subsidiary, MLPF&S, was the underwriter for the offering and sale
of the MITTS Securities.
MLPF&S is our agent for purposes of calculating the Adjusted Ending
Value and the Supplemental Redemption Amount. Under some circumstances, these
duties could result in a conflict of interest between MLPF&S's status as our
subsidiary and its responsibilities as calculation agent.
MLPF&S also is a soliciting dealer in the shares of the Energy SPDR
Fund and is the index compilation agent for the Energy Select Sector Index.
Under some circumstances, these duties could result in a conflict of interest
between MLPF&S' status as our subsidiary and its responsibilities to the
Energy SPDR Fund and the Energy Select Sector Index. Please see the section
entitled "Risk Factors--Potential conflicts" in this prospectus.
Who is ML&Co.?
Merrill Lynch & Co., Inc. is a holding company with various
subsidiary and affiliated companies that provide investment, financing,
insurance and related services on a global basis. For information about
ML&Co., see the section entitled "Merrill Lynch & Co., Inc." in this
prospectus. You should also read the other documents we have filed with the
SEC, which you can find by referring to the section "Where You Can Find More
Information" in this prospectus.
Are there any risks associated with my investment?
Yes, an investment in the MITTS Securities is subject to risks.
Please refer to the section "Risk Factors" in this prospectus.
RISK FACTORS
Your investment in the MITTS Securities will involve risks. You
should carefully consider the following discussion of risks before investing
in the MITTS Securities. In addition, you should reach an investment decision
with regard to the MITTS Securities only after consulting with your legal and
tax advisers and considering the suitability of the MITTS Securities in the
light of your particular circumstances.
The MITTS Securities are unlike typical equity or debt securities
The MITTS Securities combine features of equity and debt instruments.
For example, like an equity instrument, the Supplemental Redemption Amount
will be based on the increase, if any, in the Net Asset Value per share of the
Energy SPDR Fund. However, as a holder of the MITTS Securities, you will not
be entitled to receive distributions that would be payable on the shares of
the Energy SPDR Fund if you had made a direct investment in the shares. In
addition, like a debt instrument, you will receive the principal amount of
your MITTS Securities on the maturity date. However, the terms of the MITTS
Securities differ from the terms of ordinary debt securities in that the
Supplemental Redemption Amount payable at maturity is not a fixed amount, but
is based on the Net Asset Value per share of the Energy SPDR Fund, as reduced
by the Adjustment Factor, determined on five, or, under particular
circumstances, fewer than five days shortly before the maturity date.
You may not earn a return on your investment
You should be aware that at maturity we will pay you no more than $10
for each unit of the MITTS Securities you own if the average value of the
index over five trading days shortly before the maturity does not exceed
22.4936. This will be true even if, at some time during the life of the MITTS
Securities, the Net Asset Value per share of the Energy SPDR Fund, as reduced
by the Adjustment Factor, was higher than 22.4936 but later falls below
22.4936.
Your return will not reflect the return of owning shares of the Energy SPDR
Fund or the securities and other assets comprising the Energy SPDR Fund's
investment portfolio
When determining the Supplemental Redemption Amount, if any, paid to
you at maturity, the Energy SPDR Fund's Net Asset Value per share, which
reflects the reduction of fund assets resulting from the accrual of the Energy
SPDR Fund's fees and expenses and any distributions made by the Energy SPDR
Fund, will also be reduced by the application of the Adjustment Factor.
Consequently, your return on the MITTS Securities will not reflect the return
of owning the shares of the Energy SPDR Fund or the securities and other
assets comprising the Energy SPDR Fund's investment portfolio.
Changes in the Net Asset Value per share of the Energy SPDR Fund will not
exactly mirror changes in the Energy Select Sector Index
As indicated in the Fund Prospectus, the Energy SPDR Fund's
investment objective is to provide investment results that, before expenses,
correspond generally to the price and yield performance of the publicly traded
equity securities comprising the Energy Select Sector Index. However, because
the Energy SPDR Fund's investment portfolio may not hold all of the stocks in
the Energy Select Sector Index or may not hold each stock in the same
weighting as the Energy Select Sector Index, because the Energy SPDR Fund may
hold other assets and because the Net Asset Value per share of the Energy SPDR
Fund reflects the reduction of fund assets resulting from the accrual of fees
and expenses and the payment of distributions, if any, changes in the value of
the Energy Select Sector Index and in the Net Asset Value per share of the
Energy SPDR Fund are not expected to be identical. As stated in the Fund
Prospectus, the investment adviser to the Energy SPDR Fund believes that "over
time, the `tracking error' of the Energy SPDR Fund relative to the performance
of the Energy Select Sector Index, adjusted for the effect of the Energy SPDR
Fund's expenses, will be less than 5%". There is no assurance that the
tracking error will not be greater than 5% at any time, including the time
that you may wish to sell your MITTS Securities before the maturity date or at
the time the calculation agent determines the Supplemental Redemption Amount,
if any.
Your yield may be lower than the yield on a standard debt security of comparable
maturity
The amount we pay you at maturity may be less than the return you
could earn on other investments. Your yield may be less than the yield you
would earn if you bought a standard senior non-callable Merrill Lynch & Co.,
Inc. debt security 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.
There may be an uncertain trading market for the MITTS Securities
Although the MITTS Securities are listed on the AMEX under the
trading symbol "ESM", you cannot assume that a trading market will continue to
exist for the MITTS Securities. If a trading market in the MITTS Securities
continues to exist, there can be no assurance that there will be liquidity in
the trading market. The continued existence of a trading market for the MITTS
Securities will depend on our financial performance, and other factors such as
the increase, if any, in the Net Asset Value per share of the Energy SPDR
Fund.
If a limited trading market for the MITTS Securities exists, and you
do not wish to hold your investment until maturity, fewer buyers may want to
purchase your MITTS Securities. This may affect the price you receive if you
sell before maturity.
Many factors affect the trading value of the MITTS Securities; these factors
interrelate in complex ways and the effect of any one factor may offset or
magnify the effect of another factor
The trading value of the MITTS Securities will be affected by factors
that interrelate in complex ways. It is important for you to understand that
the effect of one factor may offset the increase in the trading value of the
MITTS Securities caused by another factor and that the effect of one factor
may magnify the decrease in the trading value of the MITTS Securities caused
by another factor. For example, an increase in U.S. interest rates may offset
some or all of any increase in the trading value of the MITTS Securities
attributable to another factor, such as an increase in the Net Asset Value per
share of the Energy SPDR Fund. The following paragraphs describe the expected
impact on the trading value of the MITTS Securities given a change in a
specific factor, assuming all other conditions remain constant.
The Net Asset Value per share of the Energy SPDR Fund is expected to
affect the trading value of the MITTS Securities. We expect that the market
value of the MITTS Securities will depend substantially on the amount by which
the Net Asset Value per share of the Energy SPDR Fund, as reduced by the
Adjustment Factor, exceeds the Starting Value. Even if you choose to sell your
MITTS Securities when the Net Asset Value per share of the Energy SPDR Fund,
as reduced by the Adjustment Factor, exceeds the Starting Value, you may
receive substantially less than the amount that would be payable at maturity
based on that value because of the expectation that the Net Asset Value will
continue to fluctuate until shortly before the maturity date when the Adjusted
Ending Value is determined. If you choose to sell your MITTS Securities before
the maturity date when the Net Asset Value per share of the Energy SPDR Fund,
as adjusted by the Adjustment Factor, is below or not sufficiently above the
Starting Value, you may receive less than the $10 Principal Amount per unit of
MITTS Securities.
Changes in the levels of U.S. interest rates are expected to affect
the trading value of the MITTS Securities. Because we will pay, at a minimum,
the Principal Amount per unit of the MITTS Securities at maturity, we expect
that changes in interest rates will effect the trading value of the MITTS
Securities. In general, if U.S. interest rates increase, we expect that the
trading value of the MITTS Securities will decrease and, conversely, if U.S.
interest rates decrease, we expect that the trading value of the MITTS
Securities will increase. Interest rates may also affect the U.S. economy and,
in turn, the Net Asset Value of the Energy SPDR Fund. Rising interest rates
may lower the Net Asset Value per share of the Energy SPDR Fund and, as a
result, lower the trading value of the MITTS Securities and, conversely,
falling interest rates may increase the Net Asset Value per share of the
Energy SPDR Fund and, as a result, may increase the trading value of the MITTS
Securities.
Changes in the volatility of the Fund are expected to affect the
trading value of the MITTS Securities. Volatility is the term used to describe
the size and frequency of market fluctuations. Generally, if the volatility of
the Net Asset Value per share of the Energy SPDR Fund increases, we expect
that the trading value of the MITTS Securities will increase and, conversely,
if the volatility of the Net Asset Value per share of the Energy SPDR Fund
decreases, we expect that the trading value of the MITTS Securities will
decrease.
As the time remaining to maturity of the MITTS Securities decreases,
the "time premium" associated with the MITTS Securities will decrease. The
MITTS Securities may trade at a value above that which would be expected based
on the level of interest rates and the Net Asset Value per share of the Energy
SPDR Fund. This difference will reflect a "time premium" due to expectations
concerning the Net Asset Value per share of the Energy SPDR Fund during the
period before the maturity of the MITTS Securities. However, as the time
remaining to the maturity of the MITTS Securities decreases, we expect that
this time premium will decrease, lowering the trading value of the MITTS
Securities.
Changes in dividend yields of the stocks included in the Fund are
expected to affect the trading value of the MITTS Securities. Generally, if
dividend yields on the stocks comprising the Energy SPDR Fund increase, we
expect that the trading value of the MITTS Securities will decrease, and
conversely, if dividend yields on the stocks comprising the Energy SPDR Fund's
investment portfolio decrease, we expect that the trading value of the MITTS
Securities will increase.
Changes in our credit ratings may affect the trading value of the
MITTS Securities. Our credit ratings are an assessment of our ability to pay
our obligations. Consequently, real or anticipated changes in our credit
ratings may affect the trading value of the MITTS Securities. However, because
your return on your MITTS Securities is dependent upon factors in addition to
our ability to pay our obligations under the MITTS Securities, such as the
percentage increase in the Net Asset Value per share of the Energy SPDR Fund
at maturity, an improvement in our credit ratings will not reduce other
investment risks related to the MITTS Securities.
In general, assuming all other relevant factors are held constant, we
expect that the effect on the trading value of the MITTS Securities of a given
change in any one of the factors listed above will be less if it occurs later
in the term of the MITTS Securities than if it occurs earlier in the term of
the MITTS Securities. However, we expect that the effect on the trading value
of the MITTS Securities of an increase or decrease in the Net Asset Value per
share of the Energy SPDR Fund will be greater if it occurs later in the term
of the MITTS Securities than if it occurs earlier in the term of the MITTS
Securities.
Absence of prior active market for shares of the Energy SPDR Fund
The Energy SPDR Fund is a recently organized investment company and
there is limited operating history available. Although these shares are listed
for trading on the AMEX and a number of similar products have been traded on
the AMEX for varying periods of time, there is no assurance that an active
trading market will continue to exist for the shares of the Energy SPDR Fund.
If a trading market does continue to exist, there is no assurance that there
will be liquidity in the trading market.
Concentration in energy-related securities
Because the Energy SPDR Fund's investment portfolio is predominantly
comprised of securities of companies in the energy-producing field, the value
of the MITTS Securities may be adversely affected by an economic downturn in
the energy industry. The companies whose securities comprise the Energy SPDR
Fund's investment portfolio produce crude oil and natural gas and provide
drilling and other energy production and distribution related services. Stock
prices for these types of companies are affected by supply and demand both for
their specific product or service and for energy products in general. The
price of oil and gas, exploration and production spending, government
regulation, political events and economic conditions will likewise affect the
performance of these companies. Correspondingly, companies in the energy field
are subject to swift energy price and supply fluctuations caused by events
relating to international politics, energy conservation, the results of
exploration projects, and tax and other governmental policies. Weak demand for
these companies' products or services or for energy products and services in
general, as well as negative developments in these other areas, would
adversely affect the performance of the Energy SPDR Fund and in turn, the
trading value of the MITTS Securities.
No affiliation between ML&Co. and the Energy SPDR Fund
Our affiliate MLPF&S is both a soliciting dealer in the shares of the
Energy SPDR Fund and the Index Compilation Agent for the Energy Select Sector
Index. However, we are not affiliated with the Energy SPDR Fund or the Energy
Select Sector Index. The Energy SPDR Fund has no obligations with respect to
the MITTS Securities or amounts to be paid to you, including any obligation to
take the needs of ML&Co. or of beneficial owners of the MITTS Securities into
consideration for any reason. The Energy SPDR Fund did not receive any of the
proceeds from this offering and is not responsible for, and has not
participated in, the determination or calculation of the amount you will
receive on your MITTS Securities at maturity. In addition, the Energy SPDR
Fund is not involved with the administration or trading of the MITTS
Securities and has no obligations with respect to any amounts due under the
MITTS Securities.
You will not have shareholder's rights until you receive share of the Energy
SPDR Fund
Unless and until we deliver shares of the Energy SPDR Fund to you at
the maturity of the MITTS Securities, you will not be entitled to any rights
with respect to these shares including, without limitation, the right to
receive distributions on, to vote or to redeem these shares. For example, if
the Energy SPDR Fund sets a record date for a matter to be voted on by
shareholders before our delivery of the shares of the Energy SPDR Fund to you,
you will not be entitled to vote on that matter.
Amounts payable on the MITTS Securities may be limited by state law
New York State law governs the indenture under which the MITTS
Securities were issued. New York has usury laws that limit the amount of
interest that can be charged and paid on loans, which includes debt securities
like the MITTS Securities. 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 MITTS
Securities, to the extent permitted by law, not to voluntarily claim the
benefits of any laws concerning usurious rates of interest.
Potential conflicts of interests
The calculation agent for the MITTS Securities is one of our
subsidiaries. In some circumstances, MLPF&S's role as our subsidiary and its
responsibilities as calculation agent for the MITTS Securities could give rise
to conflicts of interests between the calculation agent and the holders of the
MITTS Securities. These conflicts could occur, for instance, in connection
with its determination as to whether a Market Disruption Event (as defined
below) has occurred.
MLPF&S is a soliciting dealer in the shares of the Energy SPDR Fund.
In some circumstances, MLPF&S's role as calculation agent for the MITTS
Securities and its role as a soliciting dealer in the shares could give rise
to conflicts of interests between the calculation agent and holders of the
MITTS Securities. These conflicts could occur in connection with its
determination as to the Adjusted Ending Value and the number of shares to be
delivered at maturity.
Additionally, MLPF&S serves as Index Compilation Agent for the Energy
Select Sector Index. In its capacity as Index Compilation Agent, MLPF&S
determines, in consultation with S&P, which securities of the S&P 500 it will
include in the Energy Select Sector Index. In some circumstances, MLPF&S's
role as calculation agent for the MITTS Securities and its role as Index
Compilation Agent could give rise to conflicts of interests between the
calculation agent and holders of the MITTS Securities.
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 we control MLPF&S, potential conflicts of interest could arise.
We anticipate entering into an arrangement with one of our
subsidiaries to hedge the market risks associated with our obligation to pay
amounts due under the MITTS Securities. This subsidiary expects to make a
profit in connection with the arrangement. We did not seek competitive bids
for the arrangement from unaffiliated parties.
MERRILL LYNCH & CO., INC.
We are a holding company that, through our U.S. and non-U.S.
subsidiaries and affiliates such as Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Merrill Lynch Government Securities Inc., Merrill Lynch Capital
Services, Inc., Merrill Lynch International, Merrill Lynch Capital Markets
Bank Ltd., Merrill Lynch Asset Management L.P. and Merrill Lynch Mercury Asset
Management, provides investment, financing, advisory, insurance, and related
products on a global basis, including:
o securities brokerage, trading and underwriting;
o investment banking, strategic services, including mergers and
acquisitions and other corporate finance advisory activities;
o asset management and other investment advisory and recordkeeping
services;
o trading and brokerage of swaps, options, forwards, futures and other
derivatives;
o securities clearance services;
o equity, debt and economic research;
o banking, trust and lending services, including mortgage lending and
related services; and
o insurance sales and underwriting services.
We provide these products and services to a wide array of clients, including
individual investors, small businesses, corporations, governments,
governmental agencies and financial institutions.
Our principal executive office is located at World Financial Center,
North Tower, 250 Vesey Street, New York, New York 10281; our telephone number
is (212) 449-1000.
If you want to find more information about us, please see the
sections entitled "Where You Can Find More Information" and "Incorporation of
Information We File with the SEC" in this prospectus.
In this prospectus, "ML&Co.", "we", "us" and "our" refer specifically
to Merrill Lynch & Co., Inc., the holding company. ML&Co. is the issuer of the
MITTS Securities described in this prospectus.
RATIO OF EARNINGS TO FIXED CHARGES
In 1998, we acquired the outstanding shares of Midland Walwyn Inc.,
in a transaction accounted for as a pooling-of-interests. The following
information for the fiscal years 1994 through 1997 has been restated as if the
two entities had always been combined.
The following table sets forth our historical ratios of earnings to
fixed charges for the periods indicated:
<TABLE>
<CAPTION>
Year Ended Last Friday in December For the Three
Months Ended
1994 1995 1996 1997 1998 March 26, 1999
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges(a).......... 1.2 1.2 1.2 1.2 1.1 1.3
- ----------
(a) The effect of combining Midland Walwyn did not change the ratios reported for the fiscal years 1994
through 1997.
</TABLE>
For the purpose of calculating the ratio of earnings to fixed
charges, "earnings" consist of earnings from continuing operations before
income taxes and fixed charges, excluding capitalized interest and preferred
security dividend requirements of subsidiaries. "Fixed charges" consist of
interest costs, the interest factor in rentals, amortization of debt issuance
costs, preferred security dividend requirements of subsidiaries, and
capitalized interest.
DESCRIPTION OF THE MITTS SECURITIES
On February 18, 1999, ML&Co. issued $51,000,000 aggregate principal
amount, or 5,100,000 units, of Energy Select Sector SPDR Fund MITTS Securities
due February 21, 2006. The MITTS Securities were issued as a series of senior
debt securities under the Senior Indenture, referred to as the 1983 Indenture,
which is more fully described in this prospectus. The MITTS Securities will
mature on February 21, 2006.
While at maturity a beneficial owner of a MITTS Security will receive
the number of shares of the Energy SPDR Fund, or cash with an equal value,
equal in value, determined based on the Ending Value, to the sum of the
Principal Amount of each MITTS Security plus the Supplemental Redemption
Amount, if any, there will be no other payment of interest, periodic or
otherwise. See "Delivery at Maturity".
The MITTS Securities are not subject to redemption by ML&Co. or at
the option of any beneficial owner prior to maturity. Upon the occurrence of
an Event of Default with respect to the MITTS Securities, beneficial owners of
the MITTS Securities may accelerate the maturity of the MITTS Securities, as
described under "Description of the MITTS Securities--Events of Default and
Acceleration" in this prospectus.
The MITTS Securities were issued in denominations of whole units.
The MITTS Securities do not have the benefit of any sinking fund.
Delivery at Maturity
At maturity, a beneficial owner of a MITTS Security will be entitled
to receive the number of shares of the Energy SPDR Fund, or cash with an equal
value, equal in value as determined based on the Ending Value, to the
Principal Amount of each MITTS Security plus the Supplemental Redemption
Amount, if any, all as provided below. The amount to be paid by ML&Co. to any
holder of the MITTS Securities on the maturity date will be aggregated based
on the total number of units then held by each holder and rounded to the
nearest cent. If the Adjusted Ending Value does not exceed the Starting Value,
a beneficial owner of a MITTS Security will be entitled to receive only the
number of shares of the Energy SPDR Fund, or cash with an equal value, equal
in value as determined based on the Ending Value, to the Principal Amount of
each MITTS Security.
If ML&Co. chooses to deliver shares of the Energy SPDR Fund to
holders of the MITTS Securities at the maturity date, ML&Co. or one of its
affiliates will deliver shares of the Energy SPDR Fund that are then newly
issued by the Energy SPDR Fund.
ML&Co. may, at its option, in lieu of delivering shares of the Energy
SPDR Fund, pay cash in an amount equal to the sum of the Principal Amount of
the MITTS Securities and the Supplemental Redemption Amount, if any. In
addition, if at any time MLPF&S ceases to be a soliciting dealer in the shares
of the Energy SPDR Fund, ML&Co. will pay the amount due to holders of the
MITTS Securities in cash instead of shares.
Determination of the Supplemental Redemption Amount
The Supplemental Redemption Amount for a MITTS Security will be
determined by the calculation agent and will equal:
<TABLE>
<CAPTION>
<S> <C>
( Adjusted Ending Value - Starting Value )
Principal Amount of each MITTS Security ($10 per unit) X ( -------------------------------------- )
( Starting Value )
</TABLE>
provided, however, that in no event will the Supplemental Redemption Amount be
less than zero.
The "Starting Value" equals 22.4936, the Net Asset Value of one share
of the Energy SPDR Fund on the Pricing Date.
"Net Asset Value" means the net asset value per share of the Energy
SPDR Fund as determined by the Energy SPDR Fund. The Energy SPDR Fund
calculates its Net Asset Value per share by dividing the value of its net
assets, i.e., the value of its total assets less total liabilities, by its
total number of shares outstanding. Expenses and fees, including the
management, administration and distribution fees, of the Energy SPDR Fund are
accrued daily and taken into account for purposes of determining its Net Asset
Value. The Net Asset Value per share of the Energy SPDR Fund is determined by
the Energy SPDR Fund each Business Day after the close of trading on the New
York Stock Exchange, ordinarily 4:00 p.m., New York time. Shares of the Energy
SPDR Fund are listed on the AMEX under the trading symbol "XLE".
The "Adjusted Ending Value" will be determined by the calculation
agent and will equal the Ending Value, as reduced by the application of the
Adjustment Factor on each Calculation Day.
The "Ending Value" will equal the average, or the arithmetic mean, of
the Net Asset Values per share of the Energy SPDR Fund on each of the first
five Calculation Days during the Calculation Period. If there are fewer than
five Calculation Days in the Calculation Period, the Ending Value will equal
the average, or the arithmetic mean, of the Net Asset Values of the Energy
SPDR Fund on each of the Calculation Days, and if there is only one
Calculation Day, then the Ending Value will be equal to the Net Asset Value
per share of the Energy SPDR Fund on that Calculation Day. If no Calculation
Days occur during the Calculation Period because of Market Disruption Events,
then the Ending Value shall mean the Net Asset Value per share of the Energy
SPDR Fund on the last Trading Day prior to the Calculation Period for which a
Net Asset Value per share of the Energy SPDR Fund was determined.
The Adjustment Factor equals 0.85% per year and will be prorated
based on a 365-day year and applied each calendar day to reduce the Ending
Value used to calculate the Supplemental Redemption Amount. As a result of the
application of the Adjustment Factor, the adjusted Net Asset Value of one
share of the Energy SPDR Fund used to calculate the Supplemental Redemption
Amount at the maturity of the MITTS Securities will be approximately 5.8% less
than the actual Net Asset Value per share of the Energy SPDR Fund on any day
during the Calculation Period.
The "Calculation Period" means the period from and including the
seventh scheduled Calculation Day prior to the Maturity Date to and including
the second scheduled Calculation Day prior to maturity.
"Calculation Day" means any Trading Day on which a Market Disruption
Event has not occurred.
"Trading Day" is a day on which the shares of the Energy SPDR Fund:
o are not suspended from trading on any national or regional
securities exchange or association or over-the-counter market at the
close of business and
o have traded at least once on a national or regional securities
exchange or association or over-the-counter market that is the
primary market for the trading of the shares of the Energy SPDR
Fund.
Fractional Shares
ML&Co. will not deliver fractional shares of the Energy SPDR Fund at
maturity. In the event ML&Co. elects to pay holders of the MITTS Securities in
shares of the Energy SPDR Fund, all amounts due to any holder of the MITTS
Securities in respect of the total number of units held by that holder will be
aggregated, and in lieu of delivering any fractional share to that holder,
that holder will receive the cash value of the fractional share based on the
Ending Value.
Hypothetical Returns
The following table illustrates, for a range of hypothetical Ending
Values,
o the Adjusted Ending Value used to calculate the Supplemental
Redemption Amount,
o the percentage change from the Starting Value to the Adjusted Ending
Value,
o the principal amount and Supplemental Redemption Amount, if any,
paid at maturity for each unit,
o the total rate of return to beneficial owners of the MITTS
Securities,
o the pretax annualized rate of return to beneficial owners of MITTS
Securities, and
o the pretax annualized rate of return of an investment in shares of
the Energy SPDR Fund. This table assumes an Adjustment Factor of
0.85% per annum.
<TABLE>
<CAPTION>
Hypothetical Percentage Principal Amount
Ending Value Change of and Supplemental Pretax Annualized Pretax Annualized
During the Hypothetical Adjusted Ending Redemption Total Rate of Rate of Return on Rate of Return of
Calculation Adjusted Ending Value Over the Amount Paid at Return on the the MITTS Shares of the Energy
Period Value Starting Value Maturity per Unit MITTS Securities Securities(1) SPDR Fund(1)(2)
------ ----- -------------- ----------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
4.50 4.24 -81.16% $ 10.00 0.00% 0.00% -18.69%
9.00 8.48 -62.32% $ 10.00 0.00% 0.00% -9.93%
13.50 12.71 -43.48% $ 10.00 0.00% 0.00% -4.50%
17.99 16.95 -24.64% $ 10.00 0.00% 0.00% -0.51%
22.49(3) 21.19 -5.80% $ 10.00 0.00% 0.00% 2.67%
26.99 25.43 13.04% $ 11.30 13.04% 1.75% 5.32%
31.49 29.66 31.88% $ 13.19 31.88% 3.97% 7.60%
35.99 33.90 50.72% $ 15.07 50.72% 5.92% 9.60%
40.49 38.14 69.55% $ 16.96 69.55% 7.65% 11.40%
44.99 42.38 88.39% $ 18.84 88.39% 9.21% 13.02%
49.49 46.61 107.23% $ 20.72 107.23% 10.63% 14.50%
53.98 50.85 126.07% $ 22.61 126.07% 11.94% 15.87%
58.48 55.09 144.91% $ 24.49 144.91% 13.15% 17.14%
62.98 59.33 163.75% $ 26.38 163.75% 14.28% 18.32%
67.48 63.56 182.59% $ 28.26 182.59% 15.33% 19.43%
- ----------------------------
(1) The annualized rates of return specified in the preceding table are calculated on a semiannual bond equivalent basis.
(2) This rate of return assumes,
(a) a constant dividend yield of 2.67% per annum, paid quarterly from the date of the initial delivery of the MITTS
Securities, applied to the Net Asset Value per share of the Energy SPDR Fund at the end of each quarter, assuming
the Net Asset Value per share of the Energy SPDR Fund increases or decreases linearly from the Starting Value to the
hypothetical Ending Value during the Calculation Period;
(b) no transaction fees or expenses in connection with the purchase of the MITTS Securities;
(c) a term from February 11, 1999 to February 21, 2006; and
(d) a Net Asset Value per share of the Energy SPDR Fund on the maturity date equal to the Ending Value.
(3) The Starting Value equals 22.4936, the Net Asset Value per share of the Energy SPDR Fund on the Pricing Date.
</TABLE>
The figures on the previous page are for purposes of illustration
only. The actual Supplemental Redemption Amount and the total and pretax
annualized rate of return resulting therefrom will depend entirely on actual
Adjusted Ending Value determined by the calculation agent as provided in this
prospectus.
Adjustments to the Net Asset Value; Market Disruption Events
If at any time the shares of the Energy SPDR Fund are subject to a
split or reverse split, the calculation agent shall adjust the Net Asset Value
per share of the Energy SPDR Fund used to calculate the Ending Value in order
to arrive at a Net Asset Value per share of the Energy SPDR Fund as if the
split or reverse split, as the case may be, had not occurred.
"Market Disruption Event" means either of the following events; as
determined by the calculation agent:
(a) the suspension or material limitation on trading for more
than two hours of trading, or during the one-half hour
period preceding the close of trading on the applicable
exchange, in each case, in 20% or more of the stocks which
then comprise the Index; or
(b) the suspension or material limitation, in each case, for
more than two hours of trading, whether by reason of
movements in price otherwise exceeding levels permitted by
the relevant exchange or otherwise,
(A) futures contracts related to the Index, or options on
these futures contracts, which are traded on any major
U.S. exchange or
(B) option contracts related to the Index which are traded
on any major U.S. exchange. or
(c) the Energy SPDR Fund (1) is unable or otherwise fails to
issue a Net Asset Value for any shares of the Energy SPDR
Fund after the close of business on the NYSE or (2) suspends
the creation or redemption of shares of the Energy SPDR
Fund.
For the purposes of paragraphs (a) and (b) 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.
For the purposes of clause (a) above, any limitations on trading
during significant market fluctuations under New York Stock Exchange Rule 80A,
or any applicable rule or regulation enacted or promulgated by the NYSE or any
other self regulatory organization or the SEC of similar scope as determined
by the calculation agent, will be considered "material".
Termination of the Energy SPDR Fund
If the Energy SPDR Fund is liquidated or otherwise terminated, for
purposes of calculating the Supplemental Redemption Amount payable at the
maturity of the MITTS Securities, the "Net Asset Value" will be calculated by
the calculation agent as follows: The Net Asset Value per share of the Energy
SPDR Fund on the Trading Day occurring immediately before any liquidating
distribution will equal the Net Asset Value for that day (the "Pre-liquidation
Date"). The calculation agent will then calculate the Net Asset Value after
the close of trading on each Trading Day, each applicable date defined as a
"Determination Date", after the Pre-liquidation Date by increasing or
decreasing, as the case may be, the Net Asset Value as of the immediately
preceding Trading Day by the percentage by which the closing value of the
Energy Select Sector Index increases or decreases from that immediately
preceding Trading Day to the Determination Date and further decreasing the Net
Asset Value by fees, expenses and non-liquidating distributions, together,
"Fund Expenses", that the calculation agent, in its sole judgment but with
reference to the Fund Expenses actually incurred by the Energy SPDR Fund
before its liquidation or termination, deems would reasonably have been
accrued and included in the calculation of the Net Asset Value per share of
the Energy SPDR Fund had it not been liquidated or terminated, from the
immediately preceding Trading Day to the Determination Date. The calculation
agent will cause notice of each 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 the values to be made
available by telephone.
If the Energy SPDR Fund is liquidated or otherwise terminated and the
Energy Select Sector Index is no longer calculated or published, an "Index
Termination Event", the calculation agent will select a successor index that
it determines, in its sole discretion, to be comparable to the Energy Select
Sector Index, and, upon the calculation agent's notification of its
determination to the Trustee and ML&Co., the calculation agent will substitute
the successor index for the Energy Select Sector Index and calculate the Net
Asset Value in accordance with the procedures referred to in the immediately
preceding paragraph with reference to the successor index. Upon any selection
by the calculation agent of a successor index, ML&Co. shall cause notice
thereof to be given to holders of the MITTS Securities.
In the event that an Index Termination Event occurs and a successor
index to the Energy Select Sector Index is not selected by the calculation
agent or is no longer published on any of the Calculation Days, the
calculation agent shall compute a substitute index for the Energy Select
Sector Index for any Calculation Day in accordance with the procedures last
used to calculate the Energy Select Sector Index prior to any discontinuance.
The calculation agent will calculate the Net Asset Value in accordance with
the procedures referred to in the first paragraph of this section with
reference to the substitute index. Upon any selection by the calculation agent
of the substitute index, ML&Co. shall cause notice thereof to be given to
holders of the MITTS Securities.
If S&P discontinues publication of the S&P 500 Index subsequent to an
Index Termination Event and
o a successor index to the Energy Select Sector Index is not
selected by the calculation agent or is no longer published on
any of the Calculation Days and
o the calculation agent is unable to calculate a substitute index
for the Energy Select Sector Index, then
the calculation agent will compute a substitute index for the S&P 500 Index
for any Calculation Day in accordance with the procedures last used to
calculate the S&P 500 Index prior to any discontinuance. If the calculation
agent calculates the substitute index for the S&P 500 Index, the calculation
agent will use the substitute index to calculate the substitute index for the
Energy Select Sector Index.
Notwithstanding these alternative arrangements, liquidation or
termination of the Energy SPDR Fund or the discontinuance of the publication
of the Energy Select Sector Index or the S&P 500 Index may adversely affect
trading in the MITTS Securities.
Events of Default and Acceleration
In case an Event of Default with respect to any MITTS Securities has
occurred and is continuing, the amount payable to a beneficial owner of a
MITTS Security upon any acceleration permitted by the MITTS Securities, with
respect to each $10 principal amount thereof, will be equal to the Principal
Amount and the Supplemental Redemption Amount, if any, calculated assuming:
o the date of early repayment is the maturity date of the MITTS
Securities and
o the Adjustment Factor is prorated based on a 365-day year and
applied each calendar day to reduce the Net Asset Value per
share of the Energy SPDR Fund used to calculate the Supplemental
Redemption Amount. See "Delivery at Maturity" in this
prospectus.
If a bankruptcy proceeding is commenced in respect of ML&Co., the claim of the
beneficial owner of a MITTS Security may be limited, under Section 502(b)(2)
of Title 11 of the United States Code, to the Principal Amount of the MITTS
Security plus an additional amount of contingent interest calculated as though
the date of the commencement of the proceeding were the maturity date of the
MITTS Securities.
In case of default in payment at the maturity date of the MITTS
Securities, whether at their stated maturity or upon acceleration, from and
after the maturity date the MITTS Securities shall bear interest, payable upon
demand of the beneficial owners thereof, at the rate of 5.83% per annum, to
the extent that payment of any interest shall be legally enforceable, on the
unpaid amount due and payable on that date in accordance with the terms of the
MITTS Securities to the date payment of any amount has been made or duly
provided for.
Global Securities
Description of the Global Securities
Beneficial owners of the MITTS Securities may not receive physical
delivery of the MITTS Securities nor may they be entitled to have the MITTS
Securities registered in their names. The MITTS Securities currently are
represented by one or more fully registered global securities. Each global
security was deposited with, or on behalf of, The Depository Trust Company or
DTC, DTC, together with any successor thereto, being (a "depositary"), as
depositary, registered in the name of Cede & Co., DTC's partnership nominee.
Unless and until it is exchanged in whole or in part for MITTS Securities in
definitive form, no global security may be transferred except as a whole by
the depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary or by the
depositary or any nominee to a successor of the depositary or a nominee of
that successor.
So long as DTC, or its nominee, is a registered owner of a global
security, DTC or its nominee, as the case may be, will be considered the sole
owner or holder of the MITTS Securities represented by a global security for
all purposes under the 1983 Indenture. Except as provided below, the
beneficial owners of the MITTS Securities represented by a global security
will not be entitled to have the MITTS Securities represented by the global
security registered in their names, will not receive or be entitled to receive
physical delivery of the MITTS Securities in definitive form and will not be
considered the owners or holders under the 1983 Indenture, including for
purposes of receiving any reports delivered by ML&Co. or the trustee under the
1983 Indenture. Accordingly, each person owning a beneficial interest in a
global security must rely on the procedures of DTC and, if that person is not
a participant of DTC on the procedures of the participant through which that
person owns its interest, to exercise any rights of a holder under the 1983
Indenture. ML&Co. understands that under existing industry practices, in the
event that ML&Co. requests any action of holders or that an owner of a
beneficial interest in a global security desires to give or take any action
which a holder is entitled to give or take under the 1983 Indenture, DTC would
authorize the participants holding the relevant beneficial interests to give
or take any action, and the participants would authorize beneficial owners
owning through those participants to give or take action or would otherwise
act upon the instructions of beneficial owners. Conveyance of notices and
other communications by DTC to participants, by participants to indirect
participants and by participants and indirect participants to beneficial
owners will be governed by arrangements among them, subject to any statutory
or regulatory requirements as may be in effect from time to time.
DTC Procedures
The following is based on information furnished by DTC:
DTC is the securities depositary for the MITTS Securities. The MITTS
Securities were issued as fully registered securities registered in the name
of Cede & Co., DTC's partnership nominee. One or more fully registered global
securities were issued for the MITTS Securities in the aggregate principal
amount of the MITTS Securities, and were deposited with DTC.
DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered under to the provisions of Section 17A of the Securities
and Exchange Act of 1934, as amended. DTC holds securities that its
participants deposit with DTC. DTC also facilitates the settlement among
participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct participants of DTC include securities brokers
and dealers, banks, trust companies, clearing corporations and other
organizations. DTC is owned by a number of its direct participants and by the
NYSE, the AMEX and the National Association of Securities Dealers, Inc. Access
to the DTC's system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a direct participant, either directly or indirectly. The
rules applicable to DTC and its participants are on file with the SEC.
Purchases of MITTS Securities under DTC's system must be made by or
through direct participants, which will receive a credit for the MITTS
Securities on DTC's records. The ownership interest of each beneficial owner
is in turn to be recorded on the records of direct and indirect participants.
Beneficial owners will not receive written confirmation from DTC of their
purchase, but beneficial owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their
holdings, from the direct participants or indirect participants through which
the beneficial owner entered into the transaction. Transfers of ownership
interests in the MITTS Securities will be accomplished by entries made on the
books of participants acting on behalf of beneficial owners.
To facilitate subsequent transfers, all MITTS Securities deposited
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of MITTS Securities with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual beneficial owners of the MITTS Securities; DTC's records reflect
only the identity of the direct participants to whose accounts the MITTS
Securities are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to direct
participants, by direct participants to indirect participants, and by direct
and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the
MITTS Securities. Under its usual procedures, DTC mails an omnibus proxy to
ML&Co. as soon as possible after the applicable record date. The omnibus proxy
assigns Cede & Co.'s consenting or voting rights to those direct participants
identified in a listing attached to the omnibus proxy to whose accounts the
MITTS Securities are credited on the record date identified in a listing
attached to the omnibus proxy.
Principal, premium, if any, and/or interest, if any, payments on the
MITTS Securities will be made in immediately available funds to DTC. DTC's
practice is to credit direct participants' accounts on the applicable payment
date in accordance with their respective holdings shown on the depositary's
records unless DTC has reason to believe that it will not receive payment on
that date. Payments by participants to beneficial owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in "street
name", and will be the responsibility of the participant and not of DTC, the
trustee or ML&Co., subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal, premium, if any, and/or
interest, if any, to DTC is the responsibility of ML&Co. or the trustee,
disbursement of payments to direct participants is the responsibility of DTC,
and disbursement of payments to the beneficial owners is the responsibility of
direct and indirect participants.
Exchange for Certificated Securities
If:
o the depositary is at any time unwilling or unable to continue as
depositary and a successor depositary is not appointed by ML&Co.
within 60 days,
o ML&Co. executes and delivers to the trustee a company order to the
effect that the global securities shall be exchangeable, or
o an Event of Default under the 1983 Indenture has occurred and is
continuing with respect to the MITTS Securities,
the global securities will be exchangeable for MITTS Securities in definitive
form of like tenor and of an equal aggregate principal amount, in
denominations of $10 and integral multiples of $10. The definitive MITTS
Securities will be registered in the name or names as the depositary shall
instruct the trustee. It is expected that instructions may be based upon
directions received by the depositary from participants with respect to
ownership of beneficial interests in the global securities.
In addition, ML&Co. may decide to discontinue use of the system of
book-entry transfers through the depositary. In that event, MITTS Securities
in definitive form will be printed and delivered.
The information in this section concerning DTC and DTC's system has
been obtained from sources that ML&Co. believes to be reliable, but ML&Co. takes
no responsibility for its accuracy.
Same-Day Settlement and Delivery
All payments of principal and the Supplemental Redemption Amount, if
any, will be made by ML&Co., by delivery of shares of the Energy SPDR Fund in
an equivalent value. In the event ML&Co. elects, at its option, to pay cash in
lieu of delivering shares of the Energy SPDR Fund, ML&Co. will make that
payment in immediately available funds so long as the MITTS Securities are
maintained in book-entry form.
THE ENERGY SPDR FUND
ML&Co. has attached the Fund Prospectus describing the Energy SPDR
Fund and is delivering it to purchasers of the MITTS Securities together with
this prospectus for the convenience of reference only. The Fund Prospectus
does not constitute a part of this prospectus, nor is it incorporated by
reference in this prospectus. The summary description below is qualified in
its entirety by the information describing the Energy SPDR Fund and the Energy
Select Sector Index included in the attached Fund Prospectus.
As stated in the Fund Prospectus, the Energy SPDR Fund is an index
fund whose investment objective is to provide investment results that, before
expenses, correspond generally to the price and yield performance of the
publicly traded equity securities included in the Energy Select Sector Index.
The Energy Select Sector Index consists of the equity securities of publicly
traded companies that are components of the S&P 500 Index and are involved in
the development and production of energy products. Companies in the Energy
Select Sector Index develop and produce crude oil and natural gas, and provide
drilling and other energy related services.
Although ML&Co.'s subsidiary, MLPF&S, provides services to the Energy
SPDR Fund and the Energy Select Sector Index, ML&Co. is not affiliated with
the Energy SPDR Fund or the Energy Select Sector Index, and the Energy SPDR
Fund did not receive any of the proceeds from the sale of, or have any
obligations under, the MITTS Securities. A prospective purchaser of the MITTS
Securities should independently decide whether an investment in the MITTS
Securities and the Energy SPDR Fund is appropriate.
The Energy SPDR Fund is one of nine investment funds comprising the
Trust. Each fund's investment portfolio is comprised principally of
constituent companies whose equity securities are components of the S&P 500
Index, each representing one of nine specified market sector indices. Each
stock in the S&P 500 Index is allocated to only one Select Sector Index. The
combined companies of the nine indices represent all of the companies whose
stocks are components of the S&P 500 Index. The Energy SPDR Fund's initial
public offering occurred on December 16, 1998 and therefore it has limited
operating history.
Because the Trust is subject to the registration requirements of the
Securities Act and the Investment Company Act, the Trust is required to file
periodically information specified by the SEC. For more information about the
Energy SPDR Fund and the shares that a holder of the MITTS Securities may
receive at maturity, information provided to or filed with the SEC by the
Trust can be inspected at the SEC's public reference facilities or accessed
over the Internet through a web site maintained by the SEC at
http://www.sec.gov. Copies of these documents may also be obtained at no cost
by calling the Trust at (800) 843-2639 or by writing the Trust c/o ALPS Mutual
Funds Services, Inc., at 370 17th Street, Suite 3100, Denver, CO 80202.
Neither the Fund Prospectus nor these other documents are incorporated by
reference in this prospectus, and ML&Co. makes no representation or warranty
as to the accuracy or completeness of any of these other documents.
ML&Co. is not affiliated with the Energy SPDR Fund, and the Energy
SPDR Fund has no obligations with respect to the MITTS Securities. This
prospectus relates only to the MITTS Securities offered hereby and does not
relate to the shares of the Energy SPDR Fund or any other securities relating
to the Energy SPDR Fund. The information contained in this prospectus
regarding the Energy SPDR Fund has been derived from the publicly available
documents described in the preceding paragraph. ML&Co. makes no representation
that these publicly available documents or any other publicly available
information regarding the Energy SPDR Fund are accurate or complete.
Furthermore, there can be no assurance that all events occurring prior to the
date of this prospectus, including events that would affect the accuracy or
completeness of the publicly available documents described in the preceding
paragraph, that would affect the trading price of the shares of the Energy
SPDR Fund, and therefore the trading price of the MITTS Securities, have been
publicly disclosed. Subsequent disclosure of any material events or the
disclosure of or failure to disclose material future events concerning the
Energy SPDR Fund could affect the Supplemental Redemption Amount, if any, to
be received at maturity and therefore the trading value of the MITTS
Securities.
MLPF&S, a subsidiary of ML&Co., is a soliciting dealer in the shares
of the Energy SPDR Fund. Additionally, MLPF&S serves as Index Compilation
Agent for the Energy Select Sector Index. In its capacity as Index Compilation
Agent, MLPF&S determines, in consultation with S&P, the composition of the
securities measured by the Energy Select Sector Index.
License Agreement
S&P, the AMEX and MLPF&S have entered into a non-exclusive license
agreement providing for the license to MLPF&S, in exchange for a fee, of the
right to use indices owned and published by S&P in connection with some
securities, including the MITTS Securities, and ML&Co. is an authorized
sublicensee of MLPF&S.
The license agreement among S&P, the AMEX and MLPF&S provides that
the following language must be stated in this prospectus:
"Standard & Poor's(R)", "Standard & Poor's 500", "S&P 500(R)",
"S&P(R)", "500", "Standard & Poor's Depositary Receipts", "SPDRs", "Select
Sector SPDR" and "Select Sector Standard & Poor's Depositary Receipts" are
trademarks of Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., and have been licensed for use by MLPF&S. ML&Co., is an authorized
sublicensee of MLPF&S. The stocks comprising the Energy Select Sector Index
were selected by MLPF&S, as Index Compilation Agent, in consultation with S&P
from the universe of companies represented by the S&P 500 Index. The
composition and weightings of the stocks included in the Energy Select Sector
Index can be expected to differ from the composition and weighting of stocks
included in any similar S&P 500 sector index published and disseminated by
S&P.
The MITTS Securities, the Energy SPDR Fund and the Energy Select
Sector Index are not sponsored, endorsed, sold or promoted by S&P. S&P makes
no representation or warranty, express or implied, to the holders of the MITTS
Securities or any member of the public regarding the advisability of investing
in securities generally or in the MITTS Securities particularly or in the
ability of the Energy SPDR Fund to track the performance and yield of the
Energy Select Sector Index or in the ability of the Energy Select Sector Index
to track the performance of the energy sector represented in the stock market.
The stocks included in the Energy Select Sector Index were selected by MLPF&S
as the Index Compilation Agent in consultation with S&P from a universe of
companies involved in the development and production of energy products and
represented by the S&P 500 Index. The composition and weightings of the stocks
included in the Energy Select Sector Index can be expected to differ from the
composition and weighting of stocks included in any corresponding S&P 500
sector index that is published and disseminated by S&P. S&P's only
relationship to the Index Compilation Agent is the licensing of some
trademarks and trade names of S&P and of the S&P 500 Index which is
determined, composed and calculated by S&P without regard to the index
compilation agent or the MITTS Securities. S&P has no obligation to take the
needs of the Index Compilation Agent, ML&Co. or the holders of the MITTS
Securities into consideration in determining, composing or calculating the S&P
500 Index. S&P is not responsible for and has not participated in any
determination of the timing of the sale of the MITTS Securities, prices at
which the MITTS Securities are initially to be sold, or quantities of the
MITTS Securities to be issued or in the determination or calculation of the
equation by which ML&Co. will convert the MITTS Securities ML&Co. into shares
of the Energy SPDR Fund or cash. S&P has no obligation or liability in
connection with the administration, marketing or trading of the MITTS
Securities.
S&P does not guarantee the accuracy and/or the completeness of the
S&P 500 Index, the Energy Select Sector Index or any data included therein.
S&P makes no warranty, express or implied, as to results to be obtained by
ML&Co., MLPF&S, the holders of the MITTS Securities, or any other person or
entity from the use of the S&P 500 Index, the Energy Select Sector Index or
any data included therein in connection with the rights licensed under the
license agreement described herein or for any other use. S&P makes no express
or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose with respect to the S&P
500 Index, the Energy Select Sector Index or any data included therein.
Without limiting the generality of the foregoing, in no event shall S&P have
any liability for any special, punitive, indirect or consequential damages
(including lost profits), even if notified of the possibility of these
damages.
All disclosures contained in this prospectus regarding the S&P 500
Index or the Energy Select Sector Index, including its respective make-up,
method of calculation and changes in its components, are derived from publicly
available information prepared by S&P and the Trust, respectively. ML&Co. and
MLPF&S do not assume any responsibility for the accuracy or completeness of
this information.
OTHER TERMS
ML&Co. issued the MITTS Securities as a series of senior debt
securities under the 1983 Indenture, dated as of April 1, 1983, as amended and
restated, between ML&Co. and The Chase Manhattan Bank, as trustee. A copy of
the 1983 Indenture is filed as an exhibit to the registration statement
relating to the MITTS Securities of which this prospectus is a part. The
following summaries of the material provisions of the 1983 Indenture are not
complete and are subject to, and qualified in their entirety by reference to,
all provisions of the 1983 Indenture, including the definitions of terms in
the 1983 Indenture.
ML&Co. may issue series of senior debt securities from time to time
under the 1983 Indenture, without limitation as to aggregate principal amount,
in one or more series and upon terms as ML&Co. may establish under the
provisions of the 1983 Indenture.
The 1983 Indenture and the MITTS Securities are governed by and
construed in accordance with the laws of the State of New York.
ML&Co. may issue senior debt securities with terms different from
those of senior debt securities previously issued, and issue additional senior
debt securities of a previously issued series of senior debt securities.
The senior debt securities are unsecured and rank equally with all
other unsecured and unsubordinated indebtedness of ML&Co. However, because
ML&Co. is a holding company, the rights of ML&Co. and its creditors, including
the holders of senior debt securities, to participate in any distribution of
the assets of any subsidiary upon its liquidation or reorganization or
otherwise are necessarily subject to the prior claims of creditors of the
subsidiary, except to the extent that a bankruptcy court may recognize claims
of ML&Co. itself as a creditor of the subsidiary. In addition, dividends,
loans and advances from certain subsidiaries, including MLPF&S, to ML&Co. are
restricted by net capital requirements under the Exchange Act, and under rules
of exchanges and other regulatory bodies.
Limitations Upon Liens
ML&Co. may not, and may not permit any majority-owned subsidiary to,
create, assume, incur or permit to exist any indebtedness for borrowed money
secured by a pledge, lien or other encumbrance, other than those liens
specifically permitted by the 1983 Indenture, on the Voting Stock owned
directly or indirectly by ML&Co. of any majority-owned subsidiary, other than
a majority-owned subsidiary which, at the time of the incurrence of the
secured indebtedness, has a net worth of less than $3,000,000, unless the
outstanding senior debt securities are secured equally and ratably with the
secured indebtedness.
"Voting Stock" is defined in the 1983 Indenture as the stock of the
class or classes having general voting power under ordinary circumstances to
elect at least a majority of the board of directors, managers or trustees of a
corporation provided that, for the purposes of the 1983 Indenture, stock that
carries only the right to vote conditionally on the occurrence of an event is
not considered voting stock whether or not the event has happened.
Limitation on Disposition of Voting Stock of, and Merger and Sale of Assets by,
MLPF&S
ML&Co. may not sell, transfer or otherwise dispose of any Voting
Stock of MLPF&S or permit MLPF&S to issue, sell or otherwise dispose of any of
its Voting Stock, unless, after giving effect to any transaction, MLPF&S
remains a Controlled Subsidiary.
"Controlled Subsidiary" is defined in the 1983 Indenture to mean a
corporation more than 80% of the outstanding shares of Voting Stock of which
are owned directly or indirectly by ML&Co.
In addition, ML&Co. may not permit MLPF&S to:
o merge or consolidate, unless the surviving company is a
Controlled Subsidiary, or
o convey or transfer its properties and assets substantially as an
entirety, except to one or more Controlled Subsidiaries.
Merger and Consolidation
ML&Co. may consolidate or merge with or into any other corporation and
ML&Co. may sell, lease or convey all or substantially all of its assets to any
corporation, provided that:
o the resulting corporation, if other than ML&Co., is a corporation
organized and existing under the laws of the United States of
America or any U.S. state and assumes all of ML&Co.'s obligations
to:
o pay any amounts due and payable or deliverable with respect to all
the senior debt securities; and
o perform and observe all of ML&Co.'s obligations under the 1983
Indenture, and
o ML&Co. or the successor corporation, as the case may be, is not,
immediately after any consolidation or merger, in default under
the 1983 Indenture.
Modification and Waiver
ML&Co. and the trustee may modify and amend the 1983 Indenture with
the consent of holders of at least 66 2/3% in principal amount of each
outstanding series of senior debt securities affected. However, without the
consent of each holder of any outstanding senior debt security affected, no
amendment or modification to the 1983 Indenture may:
o change the stated maturity date of the principal of, or any
installment of interest or Additional Amounts payable on, any
senior debt security or any premium payable on redemption, or
change the redemption price;
o reduce the principal amount of, or the interest or Additional
Amounts payable on, any senior debt security or reduce the
amount of principal which could be declared due and payable
before the stated maturity date;
o change the place or currency of any payment of principal or any
premium, interest or Additional Amounts payable on any senior
debt security;
o impair the right to institute suit for the enforcement of any
payment on or with respect to any senior debt security;
o reduce the percentage in principal amount of the outstanding
senior debt securities of any series, the consent of whose
holders is required to modify or amend the 1983 Indenture; or
o modify the foregoing requirements or reduce the percentage of
outstanding senior debt securities necessary to waive any past
default to less than a majority.
No modification or amendment of ML&Co.'s Subordinated Indenture or
any Subsequent Indenture for subordinated debt securities may adversely affect
the rights of any holder of ML&Co.'s senior indebtedness without the consent
of each holder affected. The holders of at least a majority in principal
amount of outstanding senior debt securities of any series may, with respect
to that series, waive past defaults under the 1983 Indenture and waive
compliance by ML&Co. with provisions in the 1983 Indenture, except as
described under "--Events of Default".
Events of Default
Each of the following will be Events of Default with respect to
senior debt securities of any series:
o default in the payment of any interest or Additional Amounts
payable when due and continuing for 30 days;
o default in the payment of any principal or premium when due;
o default in the deposit of any sinking fund payment, when due;
o default in the performance of any other obligation of ML&Co.
contained in the 1983 Indenture for the benefit of that series
or in the senior debt securities of that series, continuing for
60 days after written notice as provided in the 1983 Indenture;
o specified events in bankruptcy, insolvency or reorganization of
ML&Co.; and
o any other Event of Default provided with respect to senior debt
securities of that series which are not inconsistent with the
1983 Indenture.
If an Event of Default occurs and is continuing for any series of senior debt
securities, other than as a result of the bankruptcy, insolvency or
reorganization of ML&Co., the Trustee or the holders of at least 25% in
principal amount of the outstanding senior debt securities of that series may
declare all amounts, or any lesser amount provided for in the senior debt
securities, due and payable or deliverable immediately. At any time after a
declaration of acceleration has been made with respect to senior debt
securities of any series but before the Trustee has obtained a judgment or
decree for payment of money, the holders of a majority in principal amount of
the outstanding senior debt securities of that series may rescind any
declaration of acceleration and its consequences, if all payments due, other
than those due as a result of acceleration, have been made and all Events of
Default have been remedied or waived.
The holders of a majority in principal amount or aggregate issue
price of the outstanding senior debt securities of that series may waive any
Event of Default with respect to that series, except a default:
o in the payment of any amounts due and payable or deliverable under
the debt securities of that series; or
o in respect of an obligation or provision of the 1983 Indenture
which cannot be modified under the terms of that Indenture
without the consent of each holder of each outstanding security
of each series of senior debt securities affected.
The holders of a majority in principal amount of the outstanding
senior debt securities of a series may 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 those
senior debt securities, provided that any direction shall not be in conflict
with any rule of law or the 1983 Indenture. Before proceeding to exercise any
right or power under the 1983 Indenture at the direction of the holders, the
trustee shall be entitled to receive from the holders reasonable security or
indemnification against the costs, expenses and liabilities which might be
incurred by it in complying with any direction.
The MITTS Securities and other series of senior debt securities
issued under the 1983 Indenture do not have the benefit of any cross-default
provisions with other indebtedness of ML&Co.
ML&Co. is required to furnish to the trustee annually a statement as to
the fulfillment by ML&Co. of all of its obligations under the 1983 Indenture.
PROJECTED PAYMENT SCHEDULE
Solely for purposes of applying the final Treasury Department
Regulations (the "Final Regulations") concerning the United States Federal
income tax treatment of contingent payment debt instruments to the MITTS
Securities, ML&Co. has determined that the projected payment schedule for the
MITTS Securities will consist of payment on the maturity date of the principal
amount and a projected Supplemental Redemption Amount equal to $4.9556 per
Unit (the "Projected Supplemental Redemption Amount"). This represents an
estimated yield on the MITTS Securities equal to 5.83% per annum, compounded
semiannually.
The projected payment schedule, including both the Projected
Supplemental Redemption Amount and the estimated yield on the MITTS
Securities, has been determined solely for United States Federal income tax
purposes, i.e., for purposes of applying the Final Regulations to the MITTS
Securities, and is neither a prediction nor a guarantee of what the actual
Supplemental Redemption Amount will be, or that the actual Supplemental
Redemption Amount will even exceed zero.
The following table sets forth the amount of interest that will be
deemed to have accrued with respect to each unit of the MITTS Securities
during each accrual period over an assumed term of approximately seven years
for the MITTS Securities based upon a projected payment schedule for the MITTS
Securities, including both the Projected Supplemental Redemption Amount and
the estimated yield equal to 5.83% per annum (compounded semiannually, as
determined by ML&Co. for purposes of illustrating the application of the Final
Regulations to the MITTS Securities:
<PAGE>
<TABLE>
<CAPTION>
Total Interest
Deemed to Have
Accrued on MITTS
Interest Deemed to Accrue Securities as of End
During Accrual Period of Accrual Period
Accrual Period (per Unit) (per Unit)
-------------- ---------- ----------
<S> <C> <C>
February 18, 1999 through August 21, 1999............................. $ 0.2939 $ 0.2939
August 22, 1999 through February 21, 2000............................. $ 0.3001 $ 0.5940
February 22, 2000 through August 21, 2000............................. $ 0.3088 $ 0.9028
August 22, 2000 through February 21, 2001............................. $ 0.3178 $ 1.2206
February 22, 2001 through August 21, 2001............................. $ 0.3271 $ 1.5477
August 22, 2001 through February 21, 2002............................. $ 0.3366 $ 1.8843
February 22, 2002 through August 21, 2002............................. $ 0.3465 $ 2.2308
August 22, 2002 through February 21, 2003............................. $ 0.3565 $ 2.5873
February 22, 2003 through August 21, 2003............................. $ 0.3669 $ 2.9542
August 22, 2003 through February 21, 2004............................. $ 0.3776 $ 3.3318
February 22, 2004 through August 21, 2004............................. $ 0.3886 $ 3.7204
August 22, 2004 through February 21, 2005............................. $ 0.4000 $ 4.1204
February 22, 2005 through August 21, 2005............................. $ 0.4116 $ 4.5320
August 22, 2005 through February 21, 2006............................. $ 0.4236 $ 4.9556
</TABLE>
______________
Projected Supplemental Redemption Amount=$4.9556 per unit.
All prospective investors in the Securities should consult their own
tax advisors concerning the application of the Final Regulations to their
investment in the MITTS Securities. Investors in the MITTS Securities may also
obtain the projected payment schedule, as determined by ML&Co. for purposes of
the application of the Final Regulations to the MITTS Securities, by
submitting a written request to Merrill Lynch & Co., Inc., Attn: Darryl W.
Colletti, Corporate Secretary's Office, 100 Church Street, 12th Floor, New
York, New York 10080-6512.
WHERE YOU CAN FIND MORE INFORMATION
ML&Co.
We file reports, proxy statements and other information with the SEC.
Our SEC filings are also available over the Internet at the SEC's web site at
http://www.sec.gov. You may also read and copy any document we file by
visiting the SEC's public reference rooms in Washington, D.C., New York, New
York, and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. You may also inspect our SEC
reports and other information at the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
We have filed a registration statement on Form S-3 with the SEC
covering the MITTS Securities and other securities. For further information on
ML&Co. and the MITTS Securities, you should refer to our registration
statement and its exhibits. This prospectus summarizes material provisions of
contracts and other documents that we refer you to. Because the prospectus may
not contain all the information that you may find important, you should review
the full text of these documents. We have included copies of these documents
as exhibits to our registration statement of which this prospectus is a part.
The Energy SPDR Fund
The Trust is subject to the registration requirements of the
Securities Act and the Investment Company Act and is required to file
periodically information specified by the SEC. For more information about the
Energy SPDR Fund and the shares that you may receive at maturity, information
provided to or filed with the SEC by the Trust can be inspected at the SEC's
public reference facilities or accessed over the Internet through its web
site. You may also obtain copies of these documents at no cost by calling the
Trust at (800) 843-2639 or by writing the Trust c/o ALPS Mutual Funds
Services, Inc., at 370 17th Street, Suite 3100, Denver, CO 80202. Neither the
Fund Prospectus nor these other documents are incorporated by reference in
this prospectus, and we make no representation or warranty as to the accuracy
or completeness of this information.
INCORPORATION OF INFORMATION WE FILE WITH THE SEC
The SEC allows us to incorporate by reference the information we file
with them, which means:
o incorporated documents are considered part of the prospectus;
o we can disclose important information to you by referring you to
those documents; and
o information that we file with the SEC will automatically update
and supersede this incorporated information.
We incorporate by reference the documents listed below which were
filed with the SEC under the Exchange Act:
o annual report on Form 10-K for the year ended December 25, 1998;
o quarterly report on Form 10-Q for the period ended March 26, 1999;
and
o current reports on Form 8-K dated December 28, 1998, January 19,
1999, February 17, 1999, February 18, 1999, February 22, 1999,
February 23, 1999, March 26, 1999, April 13, 1999, April 19,
1999, May 26, 1999, May 28, 1999 and June 1, 1999.
We also incorporate by reference each of the following documents that we will
file with the SEC after the date of this prospectus until this offering is
completed:
o reports filed under Sections 13(a) and (c) of the Exchange Act;
o definitive proxy or information statements filed under Section 14
of the Exchange Act in connection with any subsequent
stockholders' meeting; and
o any reports filed under Section 15(d) of the Exchange Act.
You should rely only on information contained or incorporated by
reference in this prospectus. We have not, and MLPF&S has not, authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We are
not, and MLPF&S is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus
is accurate as of the date of this prospectus only. Our business, financial
condition and results of operations may have changed since that date.
You may request a copy of any filings referred to above (excluding
exhibits), at no cost, by contacting us at the following address: Mr. Lawrence
M. Egan, Jr., Corporate Secretary's Office, Merrill Lynch & Co., Inc., 100
Church Street, New York, New York 10080-6512, Telephone: (212) 602-8435.
PLAN OF DISTRIBUTION
This prospectus has been prepared in connection with secondary sales
of the MITTS Securities and is to be used by MLPF&S when making offers and
sales related to market-making transactions in the MITTS Securities.
MLPF&S may act as principal or agent in these market-making
transactions.
The MITTS Securities may be offered on the AMEX or off the exchange
in negotiated transactions or otherwise.
The distribution of the MITTS Securities will conform to the
requirements set forth in the applicable sections of Rule 2720 of the Conduct
Rules of the NASD.
EXPERTS
The consolidated financial statements and the related financial
statement schedule incorporated in this prospectus by reference from the
Annual Report on Form 10-K of Merrill Lynch & Co., Inc. and subsidiaries have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports (which express an unqualified opinion and which report on the
consolidated financial statements includes an explanatory paragraph for the
change in accounting method for certain internal-use software development
costs), which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
With respect to unaudited interim financial information for the
periods included in the Quarterly Reports on Form 10-Q which are incorporated
herein by reference, Deloitte & Touche LLP have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their reports included in such Quarterly Reports on Form
10-Q and incorporated by reference herein, they did not audit and they do not
express an opinion on such interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted
in light of the limited nature of the review procedures applied. Deloitte &
Touche LLP is not subject to the liability provisions of Section 11 of the
Securities Act for any such report on unaudited interim financial information
because any such report is not a "report" or a "part" of the Registration
Statement prepared or certified by an accountant within the meaning of
Sections 7 and 11 of the Securities Act.
